ExpertMedium1 markMultiple Choice
CPA · Question 44 · Area III: Select Transactions
A company has a $100,000 temporary difference that will result in taxable amounts in future years (DTL). The enacted tax rate for the current year is 30%. The enacted rate for future years is 25%. <br/><br/>What is the Deferred Tax Liability?
A company has a $100,000 temporary difference that will result in taxable amounts in future years (DTL). The enacted tax rate for the current year is 30%. The enacted rate for future years is 25%. <br/><br/>What is the Deferred Tax Liability?
Answer options:
A.
$30,000
B.
$25,000
C.
$5,000
D.
$0
How to approach this question
Measure Deferred Taxes using the ENACTED rate expected to apply when the difference reverses (Future Rate).
Full Answer
B.$25,000✓ Correct
Deferred tax liabilities are measured using the enacted tax rate expected to apply to taxable income in the periods in which the deferred tax liability is expected to be settled ($100,000 * 25% = $25,000).
Common mistakes
Using the current year's rate.
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