LO.2 Relix, Inc., is a domestic corporation with the following balance sheet for book and tax purposes

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LO.2 Relix, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Based on this information, determine Relix’s net deferred tax asset or net deferred tax liability at year end. Assume a 34% corporate tax rate and no valuation allowance.

Tax Debit/(Credit)

Book Debit/(Credit)

Assets Cash $ 500 $ 500 Accounts receivable 8,000 8,000 Buildings 750,000 750,000 Accumulated depreciation (450,000) (380,000)

Furniture & fixtures 70,000 70,000 Accumulated depreciation (46,000) (38,000)

Total assets $332,500 $ 410,500 Liabilities Accrued litigation expense $ 0 ($ 50,000)

Note payable (78,000) (78,000)

Total liabilities ($ 78,000) ($ 128,000)

Stockholders’ Equity Paid-in capital ($ 10,000) ($ 10,000)

Retained earnings (244,500) (272,500)

Total liabilities and stockholders’ equity ($332,500) ($ 410,500)

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South Western Federal Taxation 2011 Taxation Of Business Entities

ISBN: 9780538498616

14th Edition

Authors: James E. Smith, William A. Raabe, David M. Maloney

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