Tate, Inc. owns 80% of Jeffrey, Inc. During the current year, Jeffrey sold merchandise costing $60,000 to Tate for $75,000. At the end of the year, 10% of this merchandise remained in Tate's inventory. The tax rate is 30%.Assuming that separate income tax returns are being filed, what deferred income tax asset is created?

Question

Quizplus · Accepted Answer

The unrealized profit in ending inventory is $1,500 ($75,000 - $60,000 = $15,000 * 10%). The deferred tax asset is $450 ($1,500 * 30%).

Tate, Inc Owns 80% of Jeffrey, Inc