Question

USING 2018 CORPORATE TAX RATE OF 21%

Harrison Corporation reported pretax book income of $735,000. Tax depreciation exceeded book depreciation by $605,000. In addition, the company received $240,000 of tax-exempt municipal bond interest. The company’s prior-year tax return showed taxable income of $90,000. Compute the company’s deferred income tax expense or benefit.

Answer 1

DEFERRED TAX ASSET ( BENEFIT ) = $ 4,200
EXPLANATION IS GIVEN BELOW :
	Amount( $ )
pretax book income	$ 735,000
less: excess tax depreciation	( $ 605,000)
less: tax-exempt interest income	( $ 240,000)
NET OPERATING LOSS	( $ 110,000 )
net operating income carryback to prior year	$ 90,000
Tax rate	21%
current income tax benefit ( $ 90,000 * 21 % )	$ 18,900
NET OPERATING LOSS	( $ 110,000)
add: net operating income carryback to prior year	$ 90,000
remaining net operating loss	( $ 20,000 )
the remaining $ 20,000 net operating loss carryover will be
recorded as deferred tax asset ( benefit ) of $ 4,200   { $ 20,000* 21% }