Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year,representing a net taxable temporary difference of $200,000.During the year,Lynch reported pretax book income of $800,000.Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000.During the year,the company's tax rate decreased from 34% to 30%.Lynch's deferred income tax expense or benefit for the current year would be:

Question

Quizplus · Accepted Answer

The net change in deferred tax asset is calculated by adjusting the temporary differences and applying the new tax rate. The net temporary difference is $200,000 - $20,000 + $50,000 = $230,000. The deferred tax asset at the new rate is $230,000 * 30% = $69,000. The change in the deferred tax asset is $69,000 - $68,000 = $1,000, resulting in a net deferred tax benefit of $1,000.

Lynch Company Had a Net Deferred Tax Asset of $68,000