In its 2017 income statement, Tow Inc. reported proceeds from an officers life insurance

policy of $90,000 and depreciation of $250,000. Tow was the owner and beneficiary of the

life insurance on its officer. Tow deducted depreciation of $370,000 in its 2017 income tax

return. The tax rate is 35%. Data related to the reversal of the excess tax deduction for depreciation

follow:

Year Reversal of Excess

Tax Deduction for Depreciation

2018 $50,000

2019 40,000

2020 20,000

2021 10,000

Tow has no other temporary differences and it had no deferred tax assets or liabilities at

December 31, 2016.

Required:

In its December 31, 2017, balance sheet, what amount should Tow report as a deferred tax

liability?

Answer: defered tax liability -Is it $42,000