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Lynch Company began operations in 2016. The company reported $14,000 of depreciation expense on its income statement in 2016 and $16,000 in 2017. On its
Lynch Company began operations in 2016. The company reported $14,000 of depreciation expense on its income statement in 2016 and $16,000 in 2017. On its tax returns, Lynch deducted $42,000 for depreciation in 2016 and $47,000 in 2017. The 2017 tax return shows a tax obligation (liability) of $9, 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 $ 2017 $ b. Calculate the deferred tax liability for each year. 2016 $ 2017 $ c. Calculate the income tax expense for 2017. $
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