Goff Inc.'s taxable income is computed as follows:
Book income before tax | $ | 1,016,200 | ||
Net permanent differences | 77,930 | |||
Net temporary differences | 475,200 | |||
Taxable income | $ | 1,569,330 | ||
Goff's tax rate is 21%. Which of the following statements is true?
Multiple Choice
1)The permanent differences caused a $16,365 net increase in Goff's deferred tax liabilities.
2)The permanent differences caused a $16,365 net increase in Goff's deferred tax assets.
3)The temporary differences caused a $99,792 net increase in Goff's deferred tax assets.
4)The temporary differences caused a $99,792 net increase in Goff's deferred tax liabilities.
The correct answer is
3) The temporary differences caused a $ 99792 net increase in goffs deferred tax assets.
Explanation
As due to temporary difference, the taxable income has increased , which means the more taxes has been paid, these temporary difference will be allowed in future and at that time tax payable will reduce, so deferred tax asset has to be created of $ 99792 (475200*21%)
So the correct answer is
3) The temporary differences caused a $ 99792 net increase in goffs deferred tax assets.
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