Question

Harrison Corporation reported pretax book income of $807,500. Tax depreciation exceeded book depreciation by $690,000. In addition, the company received $160,000 of tax-exempt municipal bond interest. The company's prior-year tax return showed taxable income of $36,000. Compute the company's deferred income tax expense or benefit. E Deferred income tax benefit Deferred income tax benefit Deferred income tax expense

Answer 1

Pretax book income	807500
Less: Excess tax depreciation	690000
Less: Tax-exempt interest income	160000
Net operating loss	(42500)
Excess tax depreciation	690000
Less: NOL carryover to future years	42500
Net increase in favorable temporary differences	647500
X Tax rate	21%
Deferred income tax expense	135975