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16 September, 17:00

Weatherly Company reported the following results for the year ended December 31, 2016, its first year of operations: Income (per books before income taxes) $3,300,000 Taxable income 4,450,000 The disparity between book income and taxable income is attributable to a temporary difference, which will reverse in 2017. What should Weatherly record as a net deferred tax asset or liability for the year ended December 31, 2016, assuming that the enacted tax rates in effect are 35% in 2016 and 30% in 2017

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  1. 16 September, 17:05
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    Deferred tax asset = $402,500

    Explanation:

    given data

    Income before income taxes = $3,300,000

    Taxable income = $4,450,000

    tax rates 2016 = 35%

    tax rates 2017 = 30%

    solution

    first we will take here difference between Income before income taxes and Taxable income that is

    = Taxable income - Income before income taxes

    = $4,450,000 - $3,300,000

    = $1,150,000

    we can say now taxable income is the higher income than income before income tax

    so we get here Deferred tax asset that is

    Deferred tax asset = 35% of $1,150,000

    Deferred tax asset = $402,500
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