Tetra Corp.recorded book income of $225,000 in 2015.It does not have any permanent differences and the only temporary difference relates to $45,000 unearned income that it recorded for book purposes.Tetra anticipates satisfying this liability equally over the following three years.The current enacted tax rate is 38%.The enacted tax rates for the following three years are 35%,40%,and 45%,respectively.Under U.S.GAAP,what deferred tax amount should Tetra Corp.record for this temporary difference?

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Quizplus · Accepted Answer

The deferred tax liability is calculated using the future enacted tax rates. The unearned income of $45,000 will be recognized over three years, so $15,000 per year. The deferred tax liability is calculated as: ($15,000 * 35%) + ($15,000 * 40%) + ($15,000 * 45%) = $5,250 + $6,000 + $6,750 = $18,000.