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
B
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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