Question

Calculate the deferred tax liability at december 31, 20x1 based on the following: $65,000 asset acquired january 1, 20x1 the acquired asset has a zero estimated salvage value useful life of five years for both financial reporting and tax depreciation purposes depreciation expense for financial reporting is $13,000 per year depreciation expense for tax is $26,000 the first year, $15,600 the second year and $9,360 the third year tax rate of 30%

Answer 1

The deferred tax liability is $3000.

How to calculate the information?

A deferred tax liability is a listing on a company's balance sheet that records taxes that are owed but are not due to be paid until a future date. The liability is deferred due to a difference in timing between when the tax was accrued and when it is due to be paid.

Based on the information given, the depreciation amount will be:

= $65000/5

= $13000

The depreciation amount under tax will be:

= $65000 × 40%

= $26000

The income under the tax accounting will be less than the income under the GAAP.

Therefore, the deferred tax liability will be:

= ($26000 - $13000) × 30%

= $3900

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