Question

Cross Company reported the following results for the year ended December 31, 2018, its first year of operations: 2018 Income (per books before income taxes) $ 2,000,000 Taxable income 3,200,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2019. What should Cross record as a net deferred tax asset or liability for the year ended December 31, 2018, assuming that the enacted tax rates in effect are 40% in 2018 and 35% in 2019

Answer 1

Answer:

$420,000 deferred tax asset

Explanation:

Deferred-tax assets are asset that occurred when company's or organization record income tax is less than the one which is been paid to the tax authority.

Taxable income 3,200,000

Less;Income (per books before income taxes) $2,000,000

Total $1,200,000

Therefore

$1,200,000×35%

=$420,000 deferred tax asset.

Cross record should record $420,000 as a net deferred tax asset or liability for the year ended December 31, 2018