Use the following information for questions 70 through 72.
Lyons Company deducts insurance expense of $126,000 for tax purposes in 2014, but the expense is not yet recognized for accounting purposes. In 2015, 2016, and 2017, no insurance expense will be deducted for tax purposes, but $42,000 of insurance expense will be reported for accounting purposes in each of these years. Lyons Company has a tax rate of 40% and income taxes payable of $108,000 at the end of 2014. There were no deferred taxes at the beginning of 2014.
-What is the amount of the deferred tax liability at the end of 2014?

Question

Quizplus · Accepted Answer

The deferred tax liability at the end of 2014 is calculated based on the difference between the tax base and the accounting base of the insurance expense. The company deducts $126,000 for tax purposes in 2014 but does not recognize this expense for accounting purposes until 2015-2017. The total deferred amount is $126,000, and the tax rate is 40%, so the deferred tax liability is $126,000 * 40% = $50,400.

Use the Following Information for Questions 70 Through 72