Question

2. QuickDraw performs drafting services for local builders. At the end of its first year of operations, QuickDraw had performed $10,000 in services (revenue under GAAP) for which cash had not been received (and is not taxable under IRS rules). Assuming a 35% tax rate, determine the amount of any deferred taxes and designate whether they are a deferred tax asset or deferred tax liability.

Answer 1

Answer:

$3,500 and deferred tax liability

Explanation:

The computation of the deferred tax is shown below:

= Service performed × tax rate

where,

Service performed is $10,000

And, the tax rate is 35%

Now placing the values

The amount of deferred tax is

= $10,000 × 35%

= $3,500

This amount reflect the deferred tax liability

We simply multiplied the service performed amount with the tax rate so that the deferred tax could come