Question

The following information is provided for a firm:                                                           
                        Year                                         1                      2                      3         
                        Operating profit                      $325 million    $309 million    $330 million   
                        Capital expenditures               $77 million      $68 million      $50 million     
                        Depreciation expense             $8 million        $7 million        $6 million       
                        Taxes, GAAP                            $4 million        $3 million        $4 million       
                        Taxes IRS                                 -$1.5 million    $3.8 million     $5.2 million    
How much will the firm report in its deferred taxes liability account in year 3?

Group of answer choices

$12.70 million

$5.20 million

$4.00 million

$3.50 million                                           

Answer 1

Ans:$3.50 millions Is correct Answer

Computation of deferred tax liability to be reported (In millions)
Particulars	Year 1	Year 2	Year 3
Taxes GAAP	$4.00	$3.00	$4.00
Taxes, IRS	-$1.50	$3.80	$5.20
Deferred tax liability (reversal) for the year	$5.50	-$0.80	-$1.20
Deferred tax liability balance at the end of year	$5.50	$4.70	$3.50