Black Co., organized on January 2, 2016, had pretax accounting income of $500,000 and taxable income of $800,000 for the year ended December 31, 2016.
The only temporary difference is accrued product warranty costs that are expected to be paid as follows:

2017 $100,000
2018 $ 50,000
2019 $ 50,000
2020 $100,000

The enacted income tax rates are 25% for 2016, 30% for 2017 through 2019, and 35% for 2020. Black believes that future years’ operations will produce profits.
In its December 31, 2016, balance sheet, what amount should Black report as deferred tax asset?

Black will report a deferred tax credit of $75000 in their balance sheet for 2016

Explanation:

To determine the rate at which we will recognize the tax asset we need to use the tax rate which is applicable to the 2016 year which is 25%.

The fact that the warranty costs will be paid in 2017 and the following years has no affect on the current year's accounting income and taxable income of $800000.

We therefore will work out the deferred tax asset for 2016 on the difference between the Taxable income and the accounting profit. The difference is $300000.

We will raise a deferred tax asset of $300 000 x 25% = $75000.

Black will report a deferred tax credit of $75000 in their balance sheet.

you can lose ranking 2 ways.

1) you don't have enough points due to you expending them by asking questions/your answers are deleted.

2) your brainliest's expired. this means that brainliests, once they exceed the 30 day limit, expires. this is to ensure that you continue to contribute into the community at a constant rank if you want to continue to have/exceed the rank you have right now.

if you go to profile, and click "show more information" located on the bottom left of the box with your information (on top of the questions answered, questions asked, and friends), you will be given the following information (example):

member since : 02/13/2017, 18: 11

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look at the "brainliest answers in the last 30 days". this is the one that will affect your rank other than your points. again, once your brainliest expires (was earned 31+ days ago), it will not be counted.

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