Question

Harrison Corporation reported pretax book income of $732,500. Tax depreciation exceeded book depreciation by $630,000. In addition, the company received $232,000 of tax exempt municipal bond interest. The company's prior year tax return showed taxable income of $49,000. Compute the company's deferred income tax expense or benefit. Deferred Income tax expense

Answer 1

Pre-tax book income	732500
Excess tax depreciation	(630000)
Tax-exempt interest income	(232000)
Net operating loss	(129500)
Excess tax depreciation	630000
NOL carryover to future years	(80500)	=49000-129500
Net increase in favorable temporary differences	549500
X Tax Rate	21%
Net increase in deferred income tax liability	115395
Deferred Income tax expense	115395