Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34%). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 34%. Robinson's deferred income tax expense or benefit for the current year would be:

Question

Quizplus · Accepted Answer

The net deferred tax expense for the current year is $6,300 [($50,000 - $20,000) × 21%]. The beginning balance in the deferred tax liability account must be reduced to reflect the decrease in the tax rate by 13 percentage points ($100,000 × (13)% = $(13,000). The net adjustment results in a net deferred tax benefit of $6,700.

Robinson Company Had a Net Deferred Tax Liability of $34,000