Smith Company reported pretax book income of $412,000. Included in the computation were favorable temporary differences of $52,400, unfavorable temporary differences of $21,200, and favorable permanent differences of $41,200. Smith's deferred income tax expense or benefit would be:

Question

Quizplus · Accepted Answer

Net deferred tax expense is calculated by subtracting favorable temporary differences from unfavorable temporary differences and then applying the tax rate. Here, the net temporary differences are unfavorable ($21,200 - $52,400 = -$31,200). Assuming a tax rate of 21%, the net deferred tax expense is $31,200 * 21% = $6,552. Permanent differences do not affect deferred taxes.

Smith Company Reported Pretax Book Income of $412,000