Intermediate Accoungting ll ch 16 2The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $150,000 at December 31, 2024. This was aresult of differences between straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The asset wasacquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 25% for 2024 and 30% thereafter. Boze should report thedeferred tax effect of this difference in its December 31, 2024, balance sheet as a(n):SkippedMultiple Choicedeferred tax asset of $37,500.deferred tax asset of $45,000.deferred tax liability of $45,000.deferred tax liability of $37,500. 1Plutonic Incorporated had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities of $50 million andrecognized tax expense of $80 million. The company is subject to a tax rate of 25%. The change in deferred tax assets (ignoring any valuationallowance) was a(n):SkippedMultiple Choicedecrease of $70 million.increase of $70 million.increase of $30 million.decrease of $30 million.

A deferred tax asset is an item on a company's balance sheet that reduces its taxable income in the future. Such a line item asset can be found when a business overpays its taxes. This money will eventually be returned to the business in the form of tax relief.1. Income tax expense $80 Deffered tax asset $70 Income tax payable ($400*25%) $100 Deffered tax asset $50 So, the correct answer is option - Increase of $70 million

Business

Accounting

1 Plutonic Incorporated had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities of $50 million and recognized tax expense of $80 million. The company is subject to a tax rate of 25%. The change in deferred tax assets (ignoring any valuation allowance) was a(n): Skipped Multiple Choice O decrease of $70 million. increase of $70 million. increase of $30 million. decrease of $30 million.

1 Plutonic Incorporated had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities of $50 million and recognized tax expense of $80 million. The company is subject to a tax rate of 25%. The change in deferred tax assets (ignoring any valuation allowance) was a(n): Skipped Multiple Choice O decrease of $70 million. increase of $70 million. increase of $30 million. decrease of $30 million.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Intermediate Accoungting ll ch 16

2
The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $150,000 at December 31, 2024. This was a
result of differences between straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The asset was
acquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 25% for 2024 and 30% thereafter. Boze should report the
deferred tax effect of this difference in its December 31, 2024, balance sheet as a(n):
Skipped
Multiple Choice
deferred tax asset of $37,500.
deferred tax asset of $45,000.
deferred tax liability of $45,000.
deferred tax liability of $37,500.

1
Plutonic Incorporated had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities of $50 million and
recognized tax expense of $80 million. The company is subject to a tax rate of 25%. The change in deferred tax assets (ignoring any valuation
allowance) was a(n):
Skipped
Multiple Choice
decrease of $70 million.
increase of $70 million.
increase of $30 million.
decrease of $30 million.

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