Can I get some assistance on this problem? – XYZ Corporation expensed on the financial statements $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax return us
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XYZ Corporation expensed on the financial statements $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax return using DDB depreciation. Also, the corporation expensed $1,000,000 of warranty expense on the income statement using an estimate of work to be done on current year’s sales (matching) but deducted on the tax return only $600,000 of warrant work since tax law only allows deduction of work done – no estimates. The corporation’s tax rate is 30%. What is the deferred tax asset or liability at the end of the year – show work – see if you can compute how many taxes have been postponed or had to be prepaid because of the financial statement and tax return differences.
XYZ Corporation expensed on the financial statements $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax return using DDB depreciation. Also, the corporation expensed $1,000,000 of warranty expense on the income statement using an estimate of work to be done on current year’s sales (matching) but deducted on the tax return only $600,000 of warrant work since tax law only allows deduction of work done – no estimates. The corporation’s tax rate is 30%. What is the deferred tax asset or liability at the end of the year – show work – see if you can compute how many taxes have been postponed or had to be prepaid because of the financial statement and tax return differences.
