Weaver Company had a net deferred tax liability of $34,408 at the beginning of the year, representing a net taxable temporary difference of $101,200 (taxed at 34 percent). During the year, Weaver reported pretax book income of $404,800. Included in the computation were unfavorable temporary differences of $51,200 and favorable temporary differences of $22,400. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Weaver's deferred income tax expense or benefit for the current year would be:

Question

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The net deferred tax benefit is calculated by considering the change in the net deferred tax liability due to both the change in tax rate and the net change in temporary differences. Initially, the net deferred tax liability was $34,408, based on a 34% tax rate. With the tax rate reduction to 21%, the initial deferred tax liability on the existing $101,200 temporary difference would be recalculated to $21,252 ($101,200 * 21%). This represents a decrease in the deferred tax liability, hence a deferred tax benefit of $13,156 ($34,408 - $21,252). During the year, the net increase in temporary differences (unfavorable $51,200 - favorable $22,400 = net $28,800) would result in an additional deferred tax liability of $6,048 ($28,800 * 21%). The net deferred tax benefit for the year is the initial tax rate change benefit of $13,156 minus the increase in liability of $6,048, resulting in a net benefit of $7,108. However, the correct calculation involves adjusting for the error in the initial calculation of the benefit due to the rate change, which should be directly calculated from the change in the tax rate applied to the beginning net temporary difference, not from the recalculated deferred tax liability. The correct approach is to adjust the net deferred tax liability directly based on the new tax rate and the changes during the year, leading to the selection of the correct answer based on the provided options and the understanding that the initial calculation provided does not match any of the options, indicating a need for recalculating or reevaluating the provided explanation.

Weaver Company Had a Net Deferred Tax Liability of $34,408