Question

The first year of operations for Grayton Company is 2017. Given this information for 2017:_______. Pretax book income $90,000Estimated litigation expense 100,000Excess of tax over book depreciation 300,000Interest Income on municipal bonds 200,000 No other permanent or temporary differences exist. The litigation item will be paid in 2020 and is appropriately considered a noncurrent liability. The depreciation will reverse evenly over the next three years. Tax rate is 30%. Future net income is probable. Indicate the proper deferred tax amount (s) to appear on the 12/31/17 balance sheet a. A noncurrent liability of $90,000 b. A noncurrent liability of $60,000 c. A noncurrent asset of $30,000 and a noncurrent liability of $90,000 d. A current liability of $30,000 and a noncurrent liability of $10,000 e. A noncurrent asset of $90,000 and a noncurrent liability of $30,000

Answer 1

Answer:

b. A noncurrent liability of $60,000

Explanation:

Calculation to Indicate the proper deferred tax amount (s) to appear on the 12/31/17 balance sheet

First step is to calculate the Estimated litigation expense by multiplying it with the Tax rate percentage

($100,000 × 30%)

= $30,000

Second step is to calculate the Excess of tax over book depreciation by multiplying it with the Tax rate rate percentage

($300,000 × 30%)

= $90,000

The last step is to calculate for the proper deferred tax amount (s) to appear on the 12/31/17 balance sheet

$90,000-$30,000

=$60,000 noncurrent liability

Therefore the proper deferred tax amount (s) to appear on the 12/31/17 balance sheet will be A noncurrent liability of $60,000