contestada

Operating income and tax rates for C.J. Company’s first three years of operations were as

follows:

Income _ Enacted tax rate

2014 $300,000 35%

2015 ($750,000) 30%

2016 $1,260,000 40%

Assuming that C.J. Company opts only to carryforward its 2015 NOL, what is the amount of deferred tax asset or liability that C.J. Company would report on its December 31, 2015 balance sheet?



a. $225,000 Deferred tax liability

b. $262,500 Deferred tax liability

c. $300,000 Deferred tax asset

d. $225,000 Deferred tax asset

Respuesta :

Answer:

Correct option is C ; the DTA - Deferred tax asset  is $300,000

Explanation:

For losses of Year 2015 DTA should be created at 31/12/2015 as due to this loss future income will get reduced and consequently company's tax liability will get reduced.

DTA = 750,000 x 40% = 300,000

In year 2016 tax rate is 40% so DTA will be at this rate as after setting off the loss of year 2015 with income of 2016 the company will benefit by 750000 x 40%=300000 due to lesser income tax liability.

Hence the DTA - Deferred tax asset  is $300,000

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