Lynch Company Had a Net Deferred Tax Asset of $68,000

question 4

Multiple Choice

Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable temporary difference of $200,000 (taxed at 34 percent) . During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Lynch's deferred income tax expense or benefit for the current year would be:

• A) Net deferred tax benefit of $6,300.
• B) Net deferred tax expense of $6,300.
• C) Net deferred tax benefit of $32,300.
• D) Net deferred tax expense of $32,300.

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Definitions:

Machine-Hours

A measure of the amount of time a machine is operated, used in cost accounting to allocate machine-related expenses to products.

Multiple Overhead Rate

A costing method that uses more than one overhead rate to allocate indirect costs to products more accurately.

Plantwide Overhead Rate

A single overhead rate calculated for an entire factory or plant, applied uniformly to all the production units, regardless of the department in which they were produced.

Labor-Intensive

Refers to a type of industry or process that requires a large amount of manpower to produce goods or services, as opposed to being highly automated.