Operating income and tax rates for Blossom Company's first three years of operations were as follows: Income Enacted tax rate 2020 $270000 25% 2021 ($870000) 20% 2022 $1550000 30% Assuming that Blossom Company opts only to carryforward its 2021 NOL, what is the amount of deferred tax asset or liability that Blossom Company would report on its December 31, 2021 balance sheet? Amount Deferred tax asset or liability $174000 Deferred tax asset $174000 Deferred tax liability $217500 Deferred tax liability $261000 Deferred tax asset

Question

Business

Deacon

13 July, 17:39

Operating income and tax rates for Blossom Company's first three years of operations were as follows: Income Enacted tax rate 2020 $270000 25% 2021 ($870000) 20% 2022 $1550000 30% Assuming that Blossom Company opts only to carryforward its 2021 NOL, what is the amount of deferred tax asset or liability that Blossom Company would report on its December 31, 2021 balance sheet? Amount Deferred tax asset or liability $174000 Deferred tax asset $174000 Deferred tax liability $217500 Deferred tax liability $261000 Deferred tax asset

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Jeffrey Montes · Answer 1

Deferred tax asset $174000

Explanation:

The computation of the amount of deferred tax asset or liability for the year 2021 is shown below:

= Income in the year 2021 * enacted tax rate for the year 2021

= $870,000 * 20%

= $174,000

By multiplying the income for the year 2021 with the enacted tax rate for the year 2021 we can get the deferred tax asset and the same is shown above