Parent Company P purchased 90% of Subsidiary Company S for stock worth $100,000. Subsidiary Company S had a net book value of $50,000 including: "bonds payable" at book value of $10,000 and fair value of $15,000: "inventory" with a book value of $5,000 and a fair value of $7,000; and "PP&E" with a book value of $10,000 and a fair value of $20,000. Assuming the tax rate is 40% (and ignoring any deferred taxes on goodwill) Net deferred taxes are:

The net deferred taxes are:$2,800

Explanation:

                              Book Value   Fair ValueDifferential

Inventory                5000   7000         2000

PP&E                         10000    20000         10000

Bonds Payable        -10000    -15000          -5000

Total                                                      7000

Tax Rate at 40%                                    x 40%

Net deferred taxes                             $2,800

disadvantages of leasing a vehicle: no vehicle equity and mileage limitations

disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

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