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Question 10BE

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Found in: Page 1094

### Intermediate Accounting (Kieso)

Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201

# Clydesdale Corporation has a cumulative temporary difference related to depreciation of $580,000 at December 31, 2017. This difference will reverse as follows: 2018,$42,000; 2019, $244,000; and 2020,$294,000. Enacted tax rates are 34% for 2018 and 2019, and 40% for 2020. Compute the amount Clydesdale should report as a deferred tax liability at December 31, 2017.

The cumulative temporary difference is when an organization faces a difference in its total assets and liabilities in its financial statement and income tax base.

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## Given the amounts as

 Particulars Amount Cumulative difference related to depreciation $580,000 Difference for 2018$42,000 Difference for 2019 $244,000 Difference for 2020$294,000 Tax rate for 2018 34% Tax rate for 2019 34% Tax rate for 2020 40%

## Computation for deferred tax liability on December 31, 2017.

 Year Taxable amount Tax rate Deferred tax liability 2018 $42,000 34%$14,280 2019 $244,000 34%$82,960 2020 $294,000 40%$117,600 Total \$214,840