Question

On January 1, 2018, Gore, Inc. purchased a machine for $2,250,000 which will be depreciated $225,000 per year for financial statement reporting purposes. For income tax reporting, Gore elected to expense $250,000 and to use straight-line depreciation which will allow a cost recovery deduction of $200,000 for 2018. Assume a present and future enacted income tax rate of 30%. What amount should be added to Gore's deferred income tax liability for this temporary difference at December 31, 2018

Answer 1

Answer:

$67,500

Explanation:

Gore elected to expense $250,000

Add cost recovery deduction of $200,000

Total $450,000

Less depreciated per year $225,000

Balance of $225,000 ×Income tax rate of 30%.

=$67,500

Therefore the amount that should be added to Gore's deferred income tax liability for this temporary difference at December 31, 2018 would be $67,500