Question

Early this year, ZeZe Inc. paid a $52,000 legal fee in connection with a disputeover ZeZe’s title to investment land. ZeZe’s auditors required the corporation toexpense the payment on this year’s financial statements. According to ZeZe’s taxadviser, the payment is a nondeductible capital expenditure. ZeZe’s tax rate is 35 per cent.
a. Compute the deferred tax asset or a deferred tax liability (identify which)resulting from this difference in accounting treatment.

b. When will the temporary difference reverse?

Answer 1

Answer:

a. $18,200

b.  temporary difference reverse when ZeZe disposes of the land.

Explanation:

a. 52000*0.35=$18,200