On its financial statements for the year ended December 31, Jackson, Inc. listed $2,000,000 in post retirement benefits expense. Jackson, Inc. contributed $200,000 of the expense to its retirement plan during the year. Tax law recognizes cash contributions to a pension account as tax deductible, but not expense accruals. Jackson’s tax rate is 40%.
For the year ended December 31, Jackson, Inc. should show, based on the above, an increase in its deferred tax:
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A) |
liability account of $720,000. | |
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B) |
liability account of $80,000. | |
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C) |
asset account of $720,000. | |
Jackson’s post-retirement benefits expense will decrease income tax expense by $2,000,000 × 0.40 = $800,000. The cash contribution will decrease income taxes payable by $200,000 × 0.40 = $80,000. Because taxes payable will exceed income tax expense, the difference of $800,000 ? $80,000 = $720,000 is an increase in the deferred tax asset account. | 
发表于 2010-4-20 13:44
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