Hagar Corporation reported depreciation of $250,000 on its 2014 tax return.However,in its 2014 income statement,Hagar reported depreciation of $100,000.The difference in depreciation is a temporary difference that will reverse over time.Assuming Hagar's tax rate is constant at 30 percent,what amount should be added to the deferred income tax liability in Hagar's December 31,2014,balance sheet?

Question

Quizplus · Accepted Answer

The difference in depreciation between the tax return and income statement creates a temporary difference that will eventually reverse, resulting in higher taxable income in future periods. Therefore, Hagar should recognize a deferred tax liability equal to the tax rate (30%) multiplied by the difference in depreciation ($250,000 - $100,000 = $150,000), or $45,000 (option C).

Hagar Corporation Reported Depreciation of $250,000 on Its 2014 Tax