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

question 21

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

Calculate gross profit and understand its significance in financial analysis.

Calculate net sales and understand its impact on financial statements.

Determine and interpret the gross profit rate.

Understand the difference between multiple-step and single-step income statements.

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Definitions:

Operating Revenues

Income generated from a company's primary business activities, excluding income from investments or secondary operations.

Interest Expense

The financial liability incurred from borrowing funds that an entity faces over a predetermined period.

Dividend Payments

Payments made to shareholders out of a corporation's earnings reflecting their share in the ownership.

Operating Expense

Ongoing costs for running a product, business, or system, not including the cost of goods sold but encompassing items like salaries and rent.