Martinez Corporation prepared
Martinez Corporation prepared the following reconciliation forits first year of operations:
Pretax financial income for 2020 | $ 1,800,000 |
Tax exempt interest | (150,000) |
Originating temporary difference | 350,000 |
The temporary difference will reverse evenly over the next twoyears. The enacted tax rate for 2020 and future years is 20%. Theamount reported as net deferred income taxes on Martinez’s balancesheet at December 31, 2020, should be a Deferred Tax of$ .
Provide whether the balance sheet account is a Deferred Tax”Asset” or “Liability” and the value.
Answer:
In Balance Sheet, Deferred Tax Asset with VAlue of ( 350000*20%)i.e. $70000 will be shown because due to add on $350000 in pre taxFInancial Income for 2020 to compute Taxable income , taxableliability will be increased and over the period it will bereversed.
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