A company reported a net operating loss of $670,000 in 2019 when the current tax rate is 25% and the enacted tax rate for futureyears is 20%. The company appropriately recorded a deferred tax asset. In 2020, the company reports taxable income of $425,000.Following the net operating loss offset tax rules, the company appropriately applies the net operating loss to offset taxable income.How much of the deferred tax asset account is used in 2020?O $68,000O $134,000O $66,000O $340,000

This question presents a scenario where a company has a net operating loss in one year and a taxable…

Following the net operating loss offset tax rules, the company appropriately applies the net operating loss to offset taxable income. How much of the deferred tax asset account is used in 2020? O $68,000 O $134,000 O $66,000 O $340,000

Following the net operating loss offset tax rules, the company appropriately applies the net operating loss to offset taxable income. How much of the deferred tax asset account is used in 2020? O $68,000 O $134,000 O $66,000 O $340,000

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter26: Tax Practice And Ethics

Section: Chapter Questions

Problem 32P

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

100%

A company reported a net operating loss of $670,000 in 2019 when the current tax rate is 25% and the enacted tax rate for future
years is 20%. The company appropriately recorded a deferred tax asset. In 2020, the company reports taxable income of $425,000.
Following the net operating loss offset tax rules, the company appropriately applies the net operating loss to offset taxable income.
How much of the deferred tax asset account is used in 2020?
O $68,000
O $134,000
O $66,000
O $340,000

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