Reference no: EM131211225
Effective tax rate 40%
GAAP Income before tax 600 650 525
A $120 Warranty expense recorded & provision provided in 2xx1 but paid out 40% in 2xx2 & 60% in 2xx3
B Earned $40 interest on tax free municipal bonds in 2xx1, included in GAAP income
C Provision for bad debts made in 2xx1 of $55, realized $40 of that in 2xx2 and $15 in 2xx3; no other provisions
D Received $160 for subscription n 2xx0; 25% recorded as GAAP income in 2xx0, balance is GAAP income in 2xx1
E only depreciation expense for GAAP resulted from straight line $400 asset PURCHASED with $80 residual 4yr.life
This asset was a MACRS 3yr. Asset for tax purpose; for GAAP into service for 4 of 12 months of 2xx1 consider no other depreciable assets
F NOL carryforward is $260 at YE 2xx0
G Beginning Deferred tax asset/liability for 2xx1= $260 * 40% = $104 resulting from NOL -PLUS add from D. Subscription above
1. Compute YE 2xx0 Deferred tax asset or liability [NET] Compute for 2xx1, 2xx2, 2xx3 each year or YE as appropriate
2. GAAP tax expense
3. IRS tax payable
4. The Year end deferred tax asset or liability [NET]
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