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Reese Corporation reported $200,000 in revenues in its 2021 financial statements, of which $66,000 will not...

Reese Corporation reported $200,000 in revenues in its 2021 financial statements, of which $66,000 will not be included in the tax return until 2022. The enacted tax rate is 30% for 2021 and 25% for 2022. What amount should they report for deferred income tax liability in its balance sheet at December 31, 2021?

Please consider the change in the tax law when answering this question. Add explanation as needed. Thank you

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Answer #1

Solution:

$66,000 is Future taxable amount.

Therefore, deferred income tax liability will be created on $66,000 which will be reversed in 2022.

Since tax rate in 2022 is 25%, therefore deferred tax liability will be creater at 25%.

Hence Deferred income tax liabilty at Dec 31, 2021 balance sheet = $66000*25% = $16,500

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