Question

For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Pretax accounting income $ 300,000 Permanent difference (14,600 ) 285,400 Temporary difference-depreciation (19,000 ) Taxable income $ 266,400 Tringali's tax rate is 25%. Assume that no estimated taxes have been paid. What should Tringali report as its deferred income tax liability as of the end of its first year of operations?
a. $110,016.
b. $122,400.
c. $117,180
d.$120,681

Answer 1

Answer: $4,750

Explanation:

In calculating the deferred tax liability Tringali should use only the Temporary Difference as the Permanent difference is not considered and the temporary difference creates a difference in tax that will be paid later.

Doing that therefore will result in the following,

= 25% * 19,000

= $4,750

$4,750 is the amount that Tringali should report as its deferred income tax liability as of the end of its first year of operations.

I do not see it in the options but it is the correct answer.