Giada Foods reported $940 million in income before income taxes for 2018, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $100 million. The company also had non-tax-deductible expenses of $80 million relating to permanent differences. The income tax rate for 2018 was 35%, but the enacted rate for years after 2018 is 40%. The balance in the deferred tax liability in the December 31, 2018, balance sheet is:

Question

Quizplus · Accepted Answer

$100,000 × 40% = $40,000 deferred tax liability
Permanent differences have no effect on deferred taxes.

Giada Foods Reported $940 Million in Income Before Income Taxes