question archive In 2017, Kerry Corp's financial statement showed accrued losses on disposal of unused plant facilities of $3,600,000
In 2017, Kerry Corp's financial statement showed accrued losses on disposal of unused plant facilities of $3,600,000
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In 2017, Kerry Corp's financial statement showed accrued losses on disposal of unused plant facilities of $3,600,000. The facilities were sold in December 2018 and a $3,600,000 loss was recognized for tax purposes then. Also in 2018, Kerry Corp's paid $150,000 for a two-year life insurance policy for their CEO Kerry, and the company was the beneficiary. Assuming that the enacted tax rate is 35% in both 2017 and 2018, and that Kerry paid $1,170,000 in income taxes in 2017.
Question: What is the amount reported as net deferred income taxes on Kerry's balance sheet at December 31, 2017?
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Answer:
Amount to be reported = .$3,600,000 * 35%
= $1260000
Deferred tax arises due to temporary differences which results in future deductible amount. Future deductible amount leads to reduce taxable income and will provide future economic benefits of the company. Deferred tax liability appear s when future taxable income is more than the future pretax financial income. Thus the amount that Corp's should report is $1,260,000 asset
