S & C Company reported $220,000 depreciation on its 2018 tax return. However, they reported $40,000 depreciation expense on their 2018 income statement. The difference in depreciation is a temporary difference that will reverse over time. Assuming S & C's tax rate is constant at 20%, what amount should be added to the deferred income tax liability in S & C's December 31, 2018, balance sheet?

Question

Quizplus · Accepted Answer

The temporary difference is $220,000 - $40,000 = $180,000. The deferred tax liability is calculated as $180,000 * 20% = $36,000.

S & C Company Reported $220,000 Depreciation on Its 2018