On January 1, 2020, Lake Corp

question 51

Multiple Choice

On January 1, 2020, Lake Corp., a publicly accountable enterprise, purchased 40% of the common shares of Michigan Inc. and accounts for this investment by the equity method. During 2020, Michigan reported earnings of $ 900,000 and paid dividends of $ 300,000. Lake assumes that all of Michigan's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 20%. Lake's current income tax rate is 25%. The increase in Lake's deferred tax liability for this temporary difference is

• A) $ 120,000.
• B) $ 100,000.
• C) $ 60,000.
• D) $ 48,000.

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Definitions:

Federal Deficits

The financial situation in which the government's expenditures exceed its revenues in a given fiscal year.

Public Capital

Assets owned by the public sector or government, including infrastructure like roads, bridges, schools, and hospitals that are used for public services.

Income Redistribution

The transfer of income from certain individuals or groups to others through government policies like taxation and social benefits.

Government Securities

Financial instruments issued by a government to finance its expenditure, including bonds, bills, and notes.