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Question: In 2014, Squirrel Corp. recorded book income of $175,000. It has one temporary difference which relates to a $50,000 warranty expense that it recorded for book purposes, and no permanent differences. Squirrel anticipates satisfying this liability equally over the following two years. The current enacted tax rate is 40%. The enacted tax rates for the following four years are 30%, 35%, 30% and 40%, respectively. Under U.S. GAAP, what deferred tax amount should Squirrel Corp. record for this temporary difference?

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Accounting Basics, Accounting

Category:- Accounting Basics
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