The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $150,000 at December 31,2016.This was a result of differences between straight-line depreciation for financial reporting purposes and MACRS for tax purposes.The asset was acquired earlier in the year.Boze has no other temporary differences.The enacted tax rate is 30% for 2016 and 40% thereafter.Boze should report the deferred tax effect of this difference in its December 31,2016,balance sheet as:

Question

Quizplus · Accepted Answer

The deferred tax liability should be calculated as the difference between the financial reporting carrying value and the tax basis multiplied by the enacted tax rate. In this case, the deferred tax liability is $150,000 x 40% = $60,000. Therefore, the correct answer is B, a liability of $60,000.

The Financial Reporting Carrying Value of Boze Music's Only Depreciable