Question

At the beginning of 2021, Sheridan Co. purchased an asset for $2050000 with an estimated useful life of 5 years and an estimated salvage value of $155000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Sheridan Co.’s tax rate is 20% for 2021 and all future years.

At the end of 2021, which of the following deferred tax accounts and balances is reported on Sheridan’s balance sheet?

Account

Balance

Deferred tax liability

$88200

Deferred tax asset

$75800

Deferred tax liability

$75800

Deferred tax asset

$88200

Answer 1