Question :

Smith company has the subsequent results for its first year of operations, ending 12/31/12 Book income 400,000 The subsequent items were included in the determination of book income:

Tax exempt interest income 20,000

bad debt expenses not actually written off 25,000

goodwill amortization--not deductible for tax 60,000

penalties for EPA violations 45,000

other facts:

tax depreciation in excess of book depreciation 130,000

revenue deferred for book but recognized for tax 55,000

2012 statutory tax rate 40 percent

1. Evaluate smith's tax expense for the year ending 31^st December, 2012?

2. Evaluate smith's tax liability for the year ending 31^st December, 2012?

3. Evaluate the net total permanent differences for Smith's for the period?

4. Determine the net total temporary differences for smith for the period?

5. Determine the net impact upon its deferred tax assets/liabilities for the period?

6. Evaluate smith's effective tax rate for the year ending 31^st December, 2012?

7. if the tax rate for 2013 is increased to 45 percent, evaluate the net deferred tax asset?