Calculating and Reporting Income Tax Expense

Lynch Company began operations in 2016. The company reported $22,000 of depreciation expense on its income statement in 2016 and $24,000 in 2017. On its tax returns, Lynch deducted $34,000 for depreciation in 2016 and $39,000 in 2017. The 2017 tax return shows a tax obligation (liability) of $18,200 based on a 40% tax rate.

Required a. Determine the temporary difference between the book value of depreciable assets and the tax basis of these assets at the end of 2016 and 2017.

2016	$Answer
2017	$Answer

b. Calculate the deferred tax liability for each year.

2016	$Answer
2017	$Answer

c. Calculate the income tax expense for 2017. $Answer