Smith Company reported pretax book income of $411,000. Included in the computation were favorable temporary differences of $52,200, unfavorable temporary differences of $21,100, and favorable permanent differences of $41,100. Smith's deferred income tax expense or benefit would be:

Question

Quizplus · Accepted Answer

Net deferred tax expense is calculated by taking the difference between favorable and unfavorable temporary differences and then applying the tax rate. Here, the net temporary difference is $52,200 (favorable) - $21,100 (unfavorable) = $31,100. Assuming a tax rate of 21%, the deferred tax expense is $31,100 * 21% = $6,531. Permanent differences do not affect deferred taxes.

Smith Company Reported Pretax Book Income of $411,000