At the beginning of 2018; Sunland, Inc. had a deferred tax asset of $23000 and a...
At the beginning of 2018; Sunland, Inc. had a deferred tax asset of $23000 and a deferred tax liability of $33000. Pre-tax accounting income for 2018 was $1560000 and the enacted tax rate is 30%. The following items are included in Sunland’s pre-tax income:
Interest income from municipal bonds $126000
Accrued warranty costs, estimated to be paid in 2019 $266000
Operating loss carryforward $196000 Installment sales profit, will be taxed in 2019 $136000
Prepaid rent expense, will be used in 2019 $63000
Which of the following is required to adjust Sunland, Inc.’s deferred tax asset to its correct balance at December 31, 2018?
| A debit of $56800 |
| A debit of $49900 |
| A credit of $79800 |
| A credit of $49900 |
Homework Answers
| Deferred tax asset balance should be = $266,000*30% = $79,800 |
| Begining balance of deferred tax asset = $23000 |
| Deferred tax asset to be debited with = $79,800-$23,000= $58,300 |
| Hence, the correct option is A debit of $56,800. |
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