Question

Stellar Corporation has a cumulative temporary difference related to depreciation of $542,000 at December 31, 2017. This difference will reverse as follows: 2018, $37,000; 2019, $225,000; and 2020, $280,000. Enacted tax rates are 35% for 2018 and 2019, and 40% for 2020. Compute the amount Stellar should report as a deferred tax liability at December 31, 2017. Deferred tax liability at December 31, 2017

Answer 1

$203,700

Step-by-step explanation:

2018 2019 2020

Temporary difference $37,000 $225,000 $280,000

Tax rate 35% 35% 40%

Deferred tax liability $12,950 $78,750 $112,000

Deferred tax liability​ to be reported at December 31, 2017 = $12,950 + $78,750 + $112,000 = $203,700