Geisler Corp.provided you with the following information for the year ending December 31, 2017: Net Income before taxes: $150,000 Depreciation (included in above)$90,000 CCA$250,000
The net book value of the capital assets was $1,100,000, and their UCC was $900,000 on January 1, 2017.
A temporary difference of $200,000 is reflected in an accumulated deferred income tax liability (DTL)balance of $90,000 at January 1, 2017.
There were no permanent differences.
Taxable income in the three-year carry back period was $400,000.Tax losses are carried back as far as allowable by law.
A tax rate of 45% applies to the current and previous years.
Geisler's 2017 journal entry to record its Deferred Tax amounts would include:

Question

Quizplus · Accepted Answer

The deferred tax expense is calculated based on the change in the deferred tax liability. The temporary difference is $200,000, and the tax rate is 45%, resulting in a deferred tax expense of $90,000. Since the beginning balance of the DTL is $90,000, the change is $0, leading to a deferred tax expense of $72,000 for the year.