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qaws [65]
3 years ago
9

Dwyer Company reported the following results for the year ended December 31, 2007, its first year of operations: 2007 Income (pe

r books before income taxes) $ 1,500,000 Taxable income 2,400,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2008. What should Dwyer record as a net deferred tax asset or liability for the year ended December 31, 2007, assuming that the enacted tax rates in effect are 40% in 2007 and 35% in 2008?
Business
1 answer:
Art [367]3 years ago
8 0

Answer: $315,000 deferred tax asset

Explanation:

The amount that Dwyer should record as a net deferred tax asset or liability for the year ended December 31, 2007 will be calculated thus:

= ($2400000 – $1500000) × 35%

= $900000 × 35%

= $900000 × 35/100

= $900000 × 0.35

= $315000.

Therefore, the answer is $315,000 deferred tax asset

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In this example investor has sold 1 ABC Jan 50 Call and has bought 1 ABC Apr 60 Call. This means he bought the option ABC with the longer expiration date and with a higher strike price and sold the option ABC with the near expiration date and the lower strike price. Here both the expiration and strike price are different. So this is an example of diagonal spread.

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