Answer:
$ 85,000
Explanation:
800,000 x 35% = 280,000 income tax payable
500,00 x 35% = 175,000 income tax expense
We solve for the deferred tax asset considering the tax-rates of each year:
Year 2:
warrant expense: $100,000
Tax Rate: 30%
Deferred Tax Asset: $30,000
Year 3:
warrant expense: $50,000
Tax Rate: 30%
Deferred Tax Asset: $15,000
Year 4:
warrant expense: $50,000
Tax Rate: 30%
Deferred Tax Asset: $15,000
Year 5:
warrant expense: $100,000
Tax Rate: 25%
Deferred Tax Asset: $25,000
Total:
Future deductible amount: $300,000
Deferred Tax Asset: $85,000
the difference between the 85,000 deferred tax asset and the 105,000 generates a permanent difference in the order of 20,000 which decreases directly retained earnings as it is not an expense
