Allison Corporation (marginal tax rate of 21%) has $44,000 of tax depreciation in the current year. It also has a $40,000 bad debt deduction. For financial accounting, it has a total depreciation deduction of $28,000 and adds $50,000 to its bad debt reserve, the first year it has established a reserve. Determine if the corporation has a deferred tax asset or a deferred tax liability and its amount.

Question

Quizplus · Accepted Answer

The Answer of Allison Corporation (marginal tax rate of 21%) has $44,000 of tax depreciation in the current year. It also has a $40,000 bad debt deduction. For financial accounting, it has a total depreciation deduction of $28,000 and adds $50,000 to its bad debt reserve, the first year it has established a reserve. Determine if the corporation has a deferred tax asset or a deferred tax liability and its amount.

Allison Corporation (Marginal Tax Rate of 21%) Has $44,000 of Tax