Tara Corporation uses the equity method of accounting for its
Tara Corporation uses the equity method of accounting for its 40% investment in Flax’s common stock. During 2014, Flax reported earnings of $750,000 and paid dividends of $250,000. Assume that:
• All undistributed earnings of Flax will be distributed as dividends in future periods.
• The dividends received from Flax are eligible for the 80% dividends received deduction.
• No other temporary differences exist.
• Tara’s 2014 income tax rate is 30%.
• Enacted income tax rates after 2014 are 25%.

Required:
What would be the increase in the deferred tax liability during 2014 from the preceding transactions?

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help