Ask Question
23 August, 11:44

Freeman, Inc., reported net income of $40,000 for 2015. However, the company's income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2016. Assuming a 30% income tax rate, this situation would cause a 2015 deferred tax amount of:

+2
Answers (1)
  1. 23 August, 12:16
    0
    This situation would cause a 2015 deferred tax amount of $900

    Explanation:

    Deferred tax liability: It is a liability which shows a difference between taxable income and the accounting earnings available before taxes.

    In mathematically,

    Deferred tax liability = Taxable income - accounting earnings available before taxes

    In this question, we multiply the revenue item by an income tax rate

    In mathematically,

    = Revenue item * income tax rate

    = $3,000 * 30%

    = $900

    Hence, this situation would cause a 2015 deferred tax amount of $900
Know the Answer?