Lynch Company Had a Net Deferred Tax Asset of $68,408

question 98

Multiple Choice

Lynch Company had a net deferred tax asset of $68,408 at the beginning of the year, representing a net taxable deductible difference of $201,200 (taxed at 34 percent) . During the year, Lynch reported pretax book income of $804,800. Included in the computation were favorable temporary differences of $21,200 and unfavorable temporary differences of $50,600.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 $6,174.
• B)Net deferred tax expense of $6,174.
• C)Net deferred tax benefit of $32,330.
• D)Net deferred tax expense of $19,982.

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Definitions:

Partnership

A sanctioned business partnership consisting of at least two people who equally divide management tasks and profit earnings.

Proprietorship

A business owned and run by one individual, where there is no legal distinction between the owner and the business.

Corporation

A legal entity separate from its owners that is authorized to conduct business, own assets, incur liabilities, and pay taxes.

Limited Liability

A legal structure that limits the personal financial risk of the business owners, protecting their personal assets from the debts and liabilities of the business.