Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 35% corporate tax rate and no valuation allowance. Assets Cash Accounts Receivable Buildings Acc. Depreciation Furniture & Fixtures Acc. Depreciation Total Assets Liabilities Accrued Litigation Expense Note Payable Total Liabilities Stockholders’ Equity Paid in Capital Retained Earnings Total Liabilities and Stockholders’ Equity Tax Debit/(Credit) $3005,000300,000(150,000)40,000(21,000)$174,300$−0−(116,000)($116,000)($1,000)(57,300)($174,300)Book Debit/(Credit) $3005,000300,000(80,000)40,000(15,000)$250,300($27,000)(116,000)($143,000)($1,000)(106,300)($250,300)
Black, Inc.’s, gross deferred tax assets and liabilities at the beginning of Black’s year are listed below. Accrued Litigation Expense Subtotal Applicable Tax Rate Gross Deferred Tax Asset Building - Acc. Depreciation Furniture & fixtures - Acc. Depreciation Subtotal Applicable tax rate Gross deferred tax liability ($61,000)(3,000)($64,000)×35%($22.400) Beginning of Year $20,000$20,000×35%$7,000 Black, Inc.’s, book income before tax is $6,000. Black records two permanent book-tax differences. It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals and entertainment expense. Determine the net deferred tax asset or net deferred tax liability at year end.
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