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26 September, 13:52

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34 percent). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21 percent. Robinson's deferred income tax expense or benefit for the current year would be:

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  1. 26 September, 14:21
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    deferred income tax benefit during 2018: 6,700

    deferred income tax liability ending balance 27,400

    Explanation:

    beginning deferred tax laibility 34,000

    this will change to 21,000 for the tax rate change

    (100,000 x 21% = 21,000)

    thus there is a decrease of 13,000 in the tax liablity

    Then:

    book income 400,000

    temporary differenc (net) : (30,000)

    Taxable income 370,000

    30,000 x 21% = 6,300 additional deferred tax expense

    13,000 benefit - 6,300 deferred tax expense = 6.700 benefit
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