Question

Cortez, Inc., earns pretax book net income of $1,357,000 in 2018. Cortez acquires a depreciable asset in 2018, and first-year tax depreciation exceeds book depreciation by $135,700. In 2019, Cortez reports $949,900 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $33,925. Cortez reports no other temporary or permanent book-tax differences. Cortez’s pertinent U.S. Federal corporate income tax rate is 21% and Cortez earns an after-tax rate of return on capital of 8%.

a. The 2019 end-of-year balance in Cortez's deferred tax asset and deferred tax liability balance sheet accounts. If an amount is zero, enter "0". If required, round your answer to nearest whole value.

a. Deferred tax asset account balance $

b. Deferred tax liability account balance $

b. The value to Cortez of the accelerated tax deduction for depreciation, considering the time value of money. Cortez earns an after-tax rate of return on capital of 8%. The present value factor at 8% is 0.9259.

Answer 1

Ansnwer:

a) Depreciation exceed book tax 33,925

Tax rate 21%

than book depreciation exceed tax depreciation deferred assets arise that is 33925*21% = 7124.25/-

B ) Present valure of 8% is 9259

that is 7124.25*.9259

6596.34/-