Question

1. Omega Co. owns a piece of equipment. Based on the following facts, what is the appropriate 12/31/18 deferred tax balance on Omega's balance sheet with respect to this equipment?

   	12/31/18
   Original cost	$500,000
   Accumulated book depreciation	$100,000
   Accumulated tax depreciation	$300,000
   Applicable income tax rate	30%

   		$30,000 deferred tax asset
   		$60,000 deferred tax asset
   		$30,000 deferred tax liability
   		$60,000 deferred tax liability

Answer 1

Original cost = $500,000

Less: Accumulated Depreciation as per books = ($100,000)

Book value = $400,000

Tax saved on Depreciation as per books = $100,000 * 30% = $30,000

Accumulated Depreciation as per tax records = $300,000

Tax saved on Depreciation as per Tax = $300,000 * 30% = $90,000

So, from this we understand that Tax saved as per Books is less than the tax saved as per Tax

So, Taxes paid are less as per tax records. So, this represents a Deferred tax Liability

So, Deferred tax liability of $60,000

Option 'D' is correct