Question The Book basis of depreciable assets for Getty Co i

Question

The Book basis of depreciable assets for Getty Co. is $ 900,000, and the tax basis is $700,000 at the end of 2007. The enacted tax rate is 34% for all periods.

Required

Determine the amount of deferred taxes to be reported on the balance sheet at the end of 2007.

Solution

Since the tax basis is lesser than book basis, a deferred tax liability will arise as the entity gets the immediate benefit of lesser taxes in current period

Deferred tax liability = (900000 - 700000) * 34% = 68000