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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Business

Marc Salazar

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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Answers (1)

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Elaine Walsh · Answer 1

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