Ajax Products, Inc., reported an excess of warranty expense over warranty deductions of $72,000 for the...

Ajax Products, Inc., reported an excess of warranty expense over warranty deductions of $72,000 for the year ended December 31, 2020. This temporary difference will reverse in equal amounts of $24,000 in years 2021, 2022, and 2023. The enacted tax rates are as follows: 2020: 40%; 2021: 25%; 2022: 21%; 2023: 20%. The reporting for this temporary difference at December 31, 2020, would be a

Question 4 options:

	deferred tax liability of $15,840.
	deferred tax liability of $28,800.
	deferred tax asset of $28,800.
	deferred tax asset of $15,840.

Expert Solution

Year	Reversal amount	Tax rate	Deferred Tax assets $
2021	24,000	25%	6,000
2022	24,000	21%	5,040
2023	24,000	20%	4,800
Total	72,000		15,840

Correct answer is option 4.

ekkarill92 answered 7 months ago

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