Question

Lehman Corporation purchased a machine on January 2, 2020, for $4,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes:
2020 $800,000
2023 $460,000
2021 1,280,000
2024 460,000
2022 768,000
2025 232,000

Assuming an income tax rate of 20% for all years, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2021 be:________

Answer 1

Answer:

$96,000

Explanation:

Straight line depreciation = $4000000/5

Straight line depreciation = $800000

Deferred tax liability 2020 = ($800,000 - $800,000)*20% = $0

Deferred tax liability 2021 = ($1,280,000 - $800,000)*20% = $96,000

Net deferred tax liability  = $0 + $96,000 = $96,000

So, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2021 will be $96,000.