Question

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

Answer 1

Net deferred tax expense of $6,300

Step-by-step explanation:

Whenever the tax rate isn't provided it's 21%.

$50,000 – $20,000 = $30,000 net favorable (taxable) difference × 21%.

Answer 2

$10,200

Step-by-step explanation:

The computation of the deferred income tax expense or benefit is shown below:

Favorable temporary difference = $50,000

Less: Unfavorable temporary difference -$20,000

Net favorable temporary difference $30,000

We assume the tax rate is of 34%

So, the deferred tax expense is

= $30,000 × 34%

= $10,200

By finding out the net favorable temporary difference and then multiplied with the tax rate we can get the deferred tax expense and the same is shown above