Question

Weaver Company had a net deferred tax liability of $39,000 at the beginning of the year, representing a net taxable temporary difference of $101,000 (taxed at 34%). During the year, Weaver reported pretax book income of $404,000. Included in the computation were favorable temporary differences of $51,000 and unfavorable temporary differences of $22,000. At the beginning of the year, Congress reduced the corporate tax rate to 21%. Weaver's deferred income tax expense or benefit for the current year would be:

Multiple Choice

• Net deferred tax benefit of $7,040.

• Net deferred tax expense of $6,090.

• Net deferred tax benefit of $6,090.

• Net deferred tax expense of $7,040.

Answer 1

The correct answer is Net deferred tax benefit of $7,040
Deferred tax expense / (benefit) calculation
Net deferred tax expense (51,000-22,000) * 21%					6,090
Less : Downward adjustment (101,000*13%)					13,130
Net deferred tax benefit					(7,040)
13% = (34-21) %