Using the facts below, determine Prance’s 2019 deferred tax expense and any deferred tax asset or liability. Facts: Prance, Inc., earns pretax book net income of $800,000 in 2019. Prance acquires a depreciable asset that year, and first-year tax depreciation exceeds book depreciation by $80,000. Prance reported no other temporary or permanent book-tax differences. The pertinent U.S. tax rate is 21%, and Prance earns an after- tax rate of return on capital of 8%. Prance’s current income tax expense for the year = $151,200
Using the facts below, determine Prance’s 2019
Facts:
Prance, Inc., earns pretax book net income of $800,000 in 2019. Prance acquires a
Prance’s current income tax expense for the year = $151,200
Deferred tax is created when book profit is different from income tax profit.
So is there is difference then it is called as temporary difference.
It is two types
1.Deductible temporary difference
When there is tax loss which is deductible in future years, it creates asset.
2. Taxable temporary difference
When there is tax profit which is payable in future years, it creates liability.
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