Ask Question
4 February, 22:54

Stone Co. began operations in year 3 and reported $225,000 in income before income taxes for the year. Stone's year 3 tax depreciation exceeded its book depreciation by $25,000. Stone also had nondeductible book expenses of $10,000 related to permanent differences. Stone's tax rate for year 3 was 40%, and the enacted rate for years after year 3 is 35%. In its December 31, year 3, balance sheet, what amount of deferred income tax liability should Stone report?

$8,750

$10,000

$12,250

$14,000

+5
Answers (1)
  1. 4 February, 22:57
    0
    Given:

    Income before income taxes = $225,000

    Book depreciation = $25,000

    Nondeductible book expenses = $10,000

    Tax rate = 40%

    Enacted rate = 35%

    Deferred income tax liability is computed as:

    Deferred income tax liability = Book depreciation * Enacted rate

    = $25,000 * 35%

    = $8,750
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Stone Co. began operations in year 3 and reported $225,000 in income before income taxes for the year. Stone's year 3 tax depreciation ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers