At the end of year 6, the tax effects of temporary differences reported in Tortoise Company’s year-end financial statements were as follows. 

A valuation allowance was not considered necessary. Tortoise anticipates that $40,000 of the deferred tax liability will reverse in year 7, that actual warranty costs will be incurred evenly in year 8 and year 9, and that the NOL carryforward will be used in year 7. On Tortoise’s December 31, year 6 balance sheet, what amount should be reported as a deferred tax asset under U.S. GAAP? 

a. $160,000 

b. $200,000 

c. $240,000 

d. $280,000

Transcribed Image Text:

Deferred Tax Assets (Liabilities) Accelerated tax depreciation ($120,000) 80,000 Warranty expense NOL carryforward 200,000 $160,000 Total