This year, Mrs. Bard, who is head of Lyton Industries's accounting and tax department, received a compensation

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This year, Mrs. Bard, who is head of Lyton Industries's accounting and tax department, received a compensation package of $360,000. The package consisted of a $300,000 current salary and $60,000 deferred compensation. Lyton will pay the deferred compensation in three annual $20,000 installments beginning with the year in which Mrs. Bard retires. Lyton accrued a $60,000 unfunded liability for the deferred compensation on its current year financial statements.

a. How much compensation income does Mrs. Bard recognize this year?

b. What is Lyton Industries's book expense for Mrs. Bard's current compensation?

c. What is Lyton Industries's tax deduction for Mrs. Bard's current compensation?

d. Assuming a 21 percent tax rate, compute Lyton Industries's deferred tax asset or deferred tax liability (identify which) resulting from the compensation expense.

Assume the taxable year is 2018.

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Principles Of Taxation For Business And Investment Planning 2019 Edition

ISBN: 9781260161472

22nd Edition

Authors: Sally Jones, Shelley C. Rhoades Catanach, Sandra R Callaghan

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