The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $150,000 at December 31, 2013. This was a result of differences between straight-line depreciation for financial reporting purposes and MACRS for tax purposes. The asset was acquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 30% for 2013 and 40% thereafter. Boze should report the deferred tax effect of this difference in its December 31, 2013, balance sheet as:

Question

Quizplus · Accepted Answer

The deferred tax liability is calculated by multiplying the temporary difference by the enacted tax rate of 30%. Thus, the deferred tax liability at the end of 2013 will be:

Temporary Difference: $150,000
Enacted Tax Rate: 30%
Deferred Tax Liability: $45,000

Therefore, the correct answer is B) A liability of $60,000.

The Financial Reporting Carrying Value of Boze Music's Only Depreciable