Question: (Explain Computation of Deferred Tax Liability for Multiple Tax Rates) At December 31, 2010, Higley Corporation has one temporary difference which will reverse and cause

(Explain Computation of Deferred Tax Liability for Multiple Tax Rates) At December 31, 2010, Higley Corporation has one temporary difference which will reverse and cause taxable amounts in 2011. In 2010 a new tax act set taxes equal to 45% for 2010, 40% for 2011, and 34% for 2012 and years thereafter.

Explain what circumstances would call for Higley to compute its deferred tax liability at the end of 2010 by multiplying the cumulative temporary difference by:

(a) 45%.

(b) 40%.

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a The 45 tax rate would be used in computing the deferred tax liability at December 31 2010 if a net operating loss an NOL is expected in 2011 that is ... View full answer

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