A reconciliation of pretax financial statement income to taxable income is shown below for Fieval Industries for the year ended December 31, 2018, its first year of operations. The income tax rate is 40%. What amount(s) should Fieval report related to deferred income taxes in its 2018 balance sheet?

Question

A reconciliation of pretax financial statement income to taxable income is shown below for Fieval Industries for the year ended December 31, 2018, its first year of operations. The income tax rate is 40%.  What amount(s) should Fieval report related to deferred income taxes in its 2018 balance sheet?

Quizplus · Accepted Answer

$25,000 × 40% = $10,000 deferred tax asset
$70,000 × 40% = $28,000 deferred tax liability
The deferred tax asset and liability would be offset and shown as a single noncurrent deferred tax liability.

A Reconciliation of Pretax Financial Statement Income to Taxable Income