Chapter 19, Problem 10BE

To determine

Deferred tax liability: Some business activities may create a dissimilarity between the amount recorded in the books and the taxable income. These differences create deferred tax liability. For example, Mr. J is a car dealer who sold a car on installment. The actual sale happened in the current year, but the benefits are receivable in the future years. This creates a difference in the books of accounts and the taxable account.

To determine the deferred tax liability for the year 2017.

Given information: Temporary difference related to depreciation is $580,000 for the year 2017.

Temporary difference for the year 2018 is $42,000; 2019 is $244,000; and 2020 is $294,000.

Tax rates for the year 2018 and 2019 is 34% and 40% for the year 2020.