Martinez Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for...

Martinez Corporation prepared the following reconciliation for its first year of operations:

Pretax financial income for 2020	$ 1,800,000
Tax exempt interest	(150,000)
Originating temporary difference	350,000

The temporary difference will reverse evenly over the next two years. The enacted tax rate for 2020 and future years is 20%. The amount reported as net deferred income taxes on Martinez's balance sheet at December 31, 2020, should be a Deferred Tax of $ .

Provide whether the balance sheet account is a Deferred Tax "Asset" or "Liability" and the value.

Expert Solution

In Balance Sheet, Deferred Tax Asset with VAlue of ( 350000*20%) i.e. $70000 will be shown because due to add on $350000 in pre tax FInancial Income for 2020 to compute Taxable income , taxable liability will be increased and over the period it will be reversed.

ekkarill92 answered 2 years ago

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