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

question 75

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. 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. During the year, the company's tax rate decreased from 34% to 30%. Lynch's deferred income tax expense or benefit for the current year would be:

• A) Net deferred tax expense of $9,000.
• B) Net deferred tax expense of $1,000.
• C) Net deferred tax benefit of $1,000.
• D) Net deferred tax benefit of $9,000.

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Definitions:

Brokerage Commission

A charge imposed by a broker for carrying out trades or offering specific services.

Dividends

Earnings distributed to shareholders from a company's profit, generally in the form of cash or additional shares.

Outstanding Stock

Shares of a corporation's stock that have been issued and are currently held by investors, including both public investors and company officers.

Trading Securities

Trading securities are financial assets purchased by a firm with the intention of selling them in the short term to profit from price fluctuations.