Question: In Figland Company s first year of operations 2014 the company

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.

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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