Use the following information for questions.
Lyons Company deducts insurance expense of $84,000 for tax purposes in 2010, but the expense is not yet recognized for accounting purposes.In 2011, 2012, and 2013, no insurance expense will be deducted for tax purposes, but $28,000 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 $72,000 at the end of 2010.There were no deferred taxes at the beginning of 2010.
-What is the amount of the deferred tax liability at the end of 2010?

Question

Quizplus · Accepted Answer

The deferred tax liability is calculated as the temporary difference between tax and accounting purposes multiplied by the tax rate. In 2010, the entire $84,000 insurance expense is deducted for tax purposes but not for accounting purposes, creating a temporary difference. The deferred tax liability is $84,000 * 40% = $33,600.

Use the Following Information for Questions