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21 January, 09:00

Smith Company reported pretax book income of $419,000. Included in the computation were favorable temporary differences of $53,800, unfavorable temporary differences of $21,900, and favorable permanent differences of $41,900. Smith's deferred income tax expense or benefit would be:

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  1. 21 January, 10:47
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    Smith's deferred income tax expense or Benefit would be $10,846

    Explanation:

    In this question, we are asked to calculate Smith's deferred income tax expense or benefit. We proceed as follows:

    Firstly, we calculate the net favorable temporary difference.

    Mathematically, the net favorable temporary difference = Favorable temporary difference - Unfavorable temporary difference.

    From the question, we can identify that:

    Favorable temporary difference = $53,800

    Unfavorable temporary difference = $21,900

    Hence, the net favorable temporary difference = $53,800 - $21,900 = $31,900

    Now, using a tax rate of 34%, Smith's deferred income tax expense or Benefit would be 34% of $31,900

    = 34/100 * 31,900 = $10,846
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