Question

Weaver Company had a net deferred tax liability of $34,238 at the beginning of the year, representing a net taxable temporary difference of $100,700 (taxed at 34 percent). During the year, Weaver reported pretax book income of $402,800. Included in the computation were unfavorable temporary differences of $50,700 and favorable temporary differences of $21,400. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Weaver's deferred income tax expense or benefit for the current year would be:

Multiple Choice

• Net deferred tax benefit of $6,153.

• Net deferred tax expense of $6,153.

• Net deferred tax benefit of $19,244.

• Net deferred tax expense of $19,244.

Answer 1

Ans:

Opening Deferred Tax Liability : $34,238

Opening Temporary Difference : $100,700

Adjustments :

Unfavorable : $50,700

Favorable : $21,400

Closing temporary Difference : $100,700 - $50,700 + $21,400 = $71,400

Closing Deferred tax liability : $71,400 * 21% = $14,994

Net Deferred Tax Benifit : $34,238 - $14,994 = $19,244

So correct answer is option C.

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