Red, Incorporated has book income of $500,000 before federal income tax expense which includes $10,000 fines paid to the federal government and $40,000 capital gains. Its book income also includes a $20,000 bad debt expense, determined by the allowance method. Actual write offs this year were $30,000. Based only on this information, compute Red's deferred tax asset or deferred tax liability, if any. O $2,100 Deferred tax asset. $2,100 Deferred tax liability. O $6,300 Deferred tax asset. O $10,500 Deferred tax liability.
Red, Incorporated has book income of $500,000 before federal income tax expense which includes $10,000 fines paid to the federal government and $40,000 capital gains. Its book income also includes a $20,000 bad debt expense, determined by the allowance method. Actual write offs this year were $30,000. Based only on this information, compute Red's deferred tax asset or deferred tax liability, if any. O $2,100 Deferred tax asset. $2,100 Deferred tax liability. O $6,300 Deferred tax asset. O $10,500 Deferred tax liability.
Chapter26: Tax Practice And Ethics
Section: Chapter Questions
Problem 32P
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Question
D6)
![Red, Incorporated has book income of $500,000 before federal income tax
expense which includes $10,000 fines paid to the federal government and
$40,000 capital gains. Its book income also includes a $20,000 bad debt
expense, determined by the allowance method. Actual write offs this year
were $30,000. Based only on this information, compute Red's deferred tax
asset or deferred tax liability, if any.
O $2,100 Deferred tax asset.
$2,100 Deferred tax liability.
O $6,300 Deferred tax asset.
O $10,500 Deferred tax liability.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7a8d084f-a67a-492b-a3c9-9b48fe21655b%2Fe58c20bd-0470-49c1-ba49-6a6489aa833f%2Ftcz9r9r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Red, Incorporated has book income of $500,000 before federal income tax
expense which includes $10,000 fines paid to the federal government and
$40,000 capital gains. Its book income also includes a $20,000 bad debt
expense, determined by the allowance method. Actual write offs this year
were $30,000. Based only on this information, compute Red's deferred tax
asset or deferred tax liability, if any.
O $2,100 Deferred tax asset.
$2,100 Deferred tax liability.
O $6,300 Deferred tax asset.
O $10,500 Deferred tax liability.
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