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Genrish500 [490]
3 years ago
7

On June 30, 20X4, Ank Corp. pre-paid a $19,000 premium on an annual insurance policy. The premium payment was a tax-deductible e

xpense in Ank's 20X4 cash-basis tax return. The accrual-basis income statement will report a $9,500 insurance expense in 20X4 and 20X5. Ank elected early application of FASB Statement No. 109, Accounting for Income Taxes. Ank's income tax rate is 30% in 20X4 and 25% thereafter. In Ank's December 31, 20X4 balance sheet, what amount related to the insurance should be reported as a deferred income tax liability
Business
1 answer:
AURORKA [14]3 years ago
7 0

Answer:

$2,375

Explanation:

Calculation to determine what amount related to the insurance should be reported as a deferred income tax liability

Using this formula

Deferred income tax liability=Accrual-basis income statement* Tax rate

Let plug in the formula

Deferred income tax liability=$9,500*25%

Deferred income tax liability = $2,375

Therefore The amount that is related to the insurance that should be reported as a deferred income tax liability is $2,375

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