Question

In Figland Company’s first year of operations (2014), the company had pre-tax book income of $500,000 and taxable income of $800,000 at the December year-end. Figland’s only temporary difference is for accrued product warranty costs, which are expected to be paid as follows:
2015 . $100,000
2016 . $200,000

The enacted income tax rate for these years is 30%. Figland believes there is a high likeli-hood that one-third of the tax benefit associated with this future deductible amount will not be realized.

Required:
Compute the amount of deferred tax asset and related valuation allowance that would be reported in Figland’s 2014 tax note.




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  • CreatedSeptember 10, 2014
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