Question

Problem 3-13 (LO. 2)

Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,000 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini records no other temporary or permanent differences. Assuming that the pertinent U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 8%.

Enter below the 2018 end-of-year balance in Mini, Inc.'s deferred tax asset and deferred tax liability balance sheet accounts.

If amount is zero, enter "0".

a. Deferred tax asset account balance $ b. Deferred tax liability account balance $

Answer 1

Solution:

a. Deferred tax asset account balance = Bad debts expense * Tax rate = $20,000 * 21% = $4,200

b. Deferred tax liability account balance = 0