On January 1, 2008, Lebo, Inc. purchased a machine for $720,000 which will be depreciated $72,000 per year for financial statement reporting purposes. For income tax reporting, Lebo elected to expense $80,000 and to use straight-line depreciation which will allow a cost recovery deduction of $64,000 for 2008. Assume a present and future enacted income tax rate of 30%. What amount should be added to Lebo's deferred income tax liability for this temporary difference at December 31, 2008?

Question

Quizplus · Accepted Answer

($80,000 + $64,000 - $72,000) × 30% = $21,600.