A reconciliation of pretax financial statement income to taxable income is shown below for See Shipping for the year ended December 31, 2018, its first year of operations. The income tax rate is 40%. What amount should See report as a noncurrent item 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 See Shipping for the year ended December 31, 2018, its first year of operations. The income tax rate is 40%.  What amount should See report as a noncurrent item related to deferred income taxes in its 2018 balance sheet?

Quizplus · Accepted Answer

$30,000 × 40% = $12,000 deferred tax liability
$20,000 × 40% = $8,000 deferred tax liability
$5,000 × 40% = $2,000 deferred tax asset
$12,000 + 8,000 - 2,000 = $18,000 net noncurrent liability

A Reconciliation of Pretax Financial Statement Income to Taxable Income