Question

Harrison Corporation reported pretax book income of $1,160,000. Tax depreciation exceeded book depreciation by $730,000. In addition, the company received $565,000 of tax-exempt municipal bond interest. The company’s prior-year tax return showed taxable income of $127,000. Compute the company’s deferred income tax expense or benefit

Deferred income tax expense=

Answer 1

Answer:

DEFERRED TAX ASSET ( BENEFIT ) = $ 1760
EXPLANATION IS GIVEN BELOW :
	Amount( $ )
pretax book income	$ 1160000
less: excess tax depreciation	( $ 730000)
less: tax-exempt interest income	( $ 565000)
NET OPERATING LOSS	( $ 135000)
net operating income carryback to prior year	$ 127000
Tax rate	21%
current income tax benefit ( $ 127000* 21% )	$ 26670
NET OPERATING LOSS	( $ 135000)
add: net operating income carryback to prior year	$ 127000
remaining net operating loss	( $ 8000)
the remaining $ 8000 net operating loss carryover will be
recorded as deferred tax asset ( benefit ) of $ 1680 { $ 8000* 21% }