In its 20X1 income statement, Tow Inc. reported proceeds from an officers life insurance policy of $90,000

Question:

In its 20X1 income statement, Tow Inc. reported proceeds from an officer’s life insurance policy of $90,000 and depreciation of $250,000. Tow was the owner and beneficiary of the life insurance on its officer. Tow deducted depreciation of $370,000 in its 20X1 income tax return. The tax rate is 21%. Data related to the reversal of the excess tax deduction for depreciation follow:

Year .............................. Reversal of Excess Tax Deduction for Depreciation
20X2 ................................................. $50,000
20X3 ................................................... 40,000
20X4 ................................................... 20,000
20X5 ................................................... 10,000

Tow has no other temporary differences, and it had no deferred tax assets or liabilities at December 31, 20X0.


Required:

In its December 31, 20X1, balance sheet, what amount should Tow report as a deferred tax liability?

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Financial Reporting And Analysis

ISBN: 9781260247848

8th Edition

Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer

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