Lyons Company deducts insurance expense of $105,000 for tax purposes in 2012, bu
ID: 2367545 • Letter: L
Question
Lyons Company deducts insurance expense of $105,000 for tax purposes in 2012, but the expense is not yet recognized for accounting purposes. In 2013, 2014, and 2015, no insurance expense will be deducted for tax purposes, but $35,000 of insurance expense will be reported for accounting purposes in each of these years. Lyons Company has a tax rate of 40% and income taxes payable of $90,000 at the end of 2012. There were no deferred taxes at the beginning of 2012. What is the amount of the deferred tax liability at the end of 2012?Explanation / Answer
Deferred tax liability =cumulative temporary differences x enacted tax rate
the difference = 105000-90000 = 15,000
Therefore, defeered tax liability = 15,000*.4 = $6,000
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