Under the accrual method,what is the effect of the current year temporary difference in F2014? $$\begin{array} { | l | r | r | r | }
\hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 30,000 & & \
\hline \text { Revenue } & & 130,000 & 150,000 \
\hline \text { Taxable income } & & 95,000 & 105,000 \
\hline \text { Tax rate } & 30 \% & 35 \% & 35 \% \
\hline
\end{array}$$

Question

Under the accrual method,what is the effect of the current year temporary difference in F2014? $$\begin{array} { | l | r | r | r | } 
\hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 30,000 & & \
\hline \text { Revenue } & & 130,000 & 150,000 \
\hline \text { Taxable income } & & 95,000 & 105,000 \
\hline \text { Tax rate } & 30 \% & 35 \% & 35 \% \
\hline
\end{array}$$

Quizplus · Accepted Answer

The temporary difference in F2014 is the difference between revenue and taxable income, which is $130,000 - $95,000 = $35,000$. The deferred tax liability is calculated as $35,000 	imes 35\% = $12,250. The change in deferred tax liability from F2013 to F2014 is $12,250 - $30,000 = -$17,750. However, the question asks for the effect of the current year temporary difference, which is $35,000 	imes 35\% = $12,250. The correct choice is $32,500, which is the sum of the deferred tax liability from the previous year ($30,000) and the effect of the current year temporary difference ($2,500).

Under the Accrual Method,what Is the Effect of the Current