Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,and that this is Nocera's first year of operations,what is Nocera's balance in its deferred tax asset and deferred tax liability accounts at year end?

Question

Quizplus · Accepted Answer

The excess tax depreciation creates a temporary difference of $120,000, leading to a deferred tax liability of $120,000 * 35% = $42,000. There is no deferred tax asset since there are no other differences.