Question

Problem 3-34 (LO. 2) Relix, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year before recording any net deferred tax asset or net deferred tax liability. Tax Debit/(Credit) Book Debit/Credit) Assets Cash $500 $500 Accounts receivable 8,000 8,000 750,000 750,000 Buildings Accumulated depreciation Furniture and fixtures Accumulated depreciation Total assets (450,000) 70,000 (46,000) (380,000) 70,000 (38,000) $332,500 $410,500 Liabilities Accrued litigation expense Note payable (78,000) ($78,000) ($50,000) (78,000) ($128,000) Total liabilities Stockholders' Equity Paid-in capital Retained earnings ($10,000) (244,500) ($332,500) ($10,000) (272,500) ($410,500) Total liabilities and stockholders' equity The beginning of the year book-tax basis difference is listed below for the deferred tax asset. Beginning of Year $34,000 Accrued litigation expense

Fill-in choices are add: or less:

Answer 1

Pre-tax book income	$4800
Book-tax adjustments
Permanent items
Less: Tax-exempt income	2375
Add: Nondeductible business meals	780
Temporary differences
Less: Building depreciation	13000
Less: Furniture and fixtures depreciation	3800
Add: Accrued litigation expenses	16000
Taxable income	2405
Current tax expense (21%)	$505

Building depreciation = (45000-38000)-57000 = 13000

Furniture and fixtures depreciation = (46000-38000)-4200

Accrued litigation expenses = 50000-34000 = 16000