Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 35% corporate tax rate and no valuation allowance.
Assets Cash Accounts Receivable Buildings Acc. Depreciation Furniture & Fixtures Acc. Depreciation Total Assets Liabilities Accrued Litigation Expense Note Payable Total Liabilities Stockholders’ Equity Paid in Capital Retained Earnings Total Liabilities and Tax Debit/(Credit) $3005,000300,000(150,000)40,000(21,000)$174,300$−0−(116,000)($116,000)($1,000)(57,300)($174,300)Book Debit/(Credit) $3005,000300,000(80,000)40,000(15,000)$250,300($27,000)(116,000)(143,000)($1,000)(106,300)($250,300)
Black, Inc.’s, gross deferred tax assets and liabilities at the beginning of Black’s year are listed below.
Accrued Litigation Expense Subtotal Applicable Tax Rate Gross Deferred Tax Asset Building - Acc. Depreciation Furniture & fixtures - Acc. Depreciation Subtotal Applicable tax rate Gross deferred tax liability Beginning of Year $20,000$20,000×35%$7,000($61,000)(3,000)($64,000)×35%($22,400)
Black, Inc.'s, book income before tax is $6,000.Black records two permanent book-tax differences.It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals and entertainment expense.Determine Black's change in net deferred tax asset or net deferred tax liability for the current year and provide the journal entry to record this amount.
Definitions:
Boomerangs
Traditionally, a curved throwing tool used for hunting, but in modern contexts, often refers to adult children returning to live in their parents' home.
Absolute Advantage
The ability of an individual, company, or country to produce a good or service at a lower cost per unit than competitors.
Opportunity Cost
The consequence in terms of lost benefits from not selecting the immediate next preferable option when making a choice.
Productivity
The measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.