The Waterloo Company uses straight-line depreciation accounting in its corporate financial reports but MACRS depreciation accounting for income tax purposes.

At the end of the year, Waterloo reported taxable income to the IRS totaling $130,000 and pretax net income to its shareholders of $170,000.

MACRS depreciation expense for the year totaled $80,000, while straightline depreciation was only $40,000. Assume an effective tax rate of 35%; calculate Waterloo's deferred income taxes for the year.

$ Answer

Is the company's deferred income tax effect an asset or a liability?

Answer

If the income tax rate was lowered to 30%, how much will the company's deferred income taxes change?

Compute Waterloo's deferred income taxes using a 30% tax rate. $ Answer

Complete the following statement:

Waterloo's deferred income tax Answer asset/liability Answer increased/decreased by $ Answer

using a 30% tax rate.