Weaver 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, Weaver 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. At the beginning of the year, Congress reduced the corporate tax rate to 21%. Weaver'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 adjusted downward to reflect the change in the tax rate by 13 percentage points ($100,000 × 13% = $13,000 reduction in the deferred tax liability). The net adjustment is a net deferred tax benefit of $6,700.

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