Given the following data regarding two firms under different scenarios, determine the amount of any deferred tax liability or asset.
Firm 1:
|
Tax Reporting |
Financial Reporting |
|
Revenue |
$500,000 |
Revenue |
$500,000 |
|
Depreciation |
$100,000 |
Depreciation |
$50,000 |
|
Taxable income |
$400,000 |
Pretax income |
$450,000 |
|
Taxes payable |
$160,000 |
Tax expense |
$180,000 |
|
Net income |
$240,000 |
Net income |
$270,000 |
Firm 2:
|
Tax Reporting |
Financial Reporting |
|
Revenue |
$500,000 |
Revenue |
$500,000 |
|
Warranty expense |
$0 |
Warranty expense |
$10,000 |
|
Taxable income |
$500,000 |
Pretax income |
$490,000 |
|
Taxes payable |
$200,000 |
Tax expense |
$196,000 |
|
Net income |
$300,000 |
Net income |
$294,000 |
|
Firm 1 Deferred Tax: |
Firm 2 Deferred Tax: |
A.
| $20,000 Liability |
$4,000 Asset |
B.
| $30,000 Asset |
$6,000 Asset |
C.
| $20,000 Asset |
$6,000 Liability |
|
