Q17) Moore Company had book income before tax of $800,000 in 2015. The following items were...

Q17) Moore Company had book income before tax of $800,000 in 2015. The following items were included in book income before tax: Tax-exempt municipal bond interest income of $80,000. Rent income of $20,000 that was collected and included in income for tax purposes in 2014 but reported for book purposes as earned in 2015. § Tax depreciation in excess of book depreciation of $60,000. Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the balance of the Deferred Tax Liability account at the end of 2015?

A-24,000

B-18,000

C-8,000

D-6,000

Solutions

Expert Solution

solution:
given that
Moore Company had book income before tax of $800,000 in 2015.
The following items were included in book income before tax:
Tax-exempt municipal bond interest income of $80,000.
Rent income of $20,000 that was collected and included in income for tax purposes in 2014 but reported for book purposes as earned in 2015.
§ Tax depreciation in excess of book depreciation of $60,000.
Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.)
The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference.
The tax rate for all years was 40 percent.
therefore
option a
explanation:
Deferred tax liability = Tax depreciation in excess of book depreciation x Tax rate

Deferred tax liability = $60,000 x 0.40

Deferred tax liability = $24,000

ekkarill92 answered 1 year ago

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