Please show calculations: The financial reporting carrying value of Boze Music\'

Question

Please show calculations:

The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by
$150,000 at December 31, 2011. This was a result of differences between straight line depreciation for financial
reporting purposes and MACRS for tax purposes. The asset was acquired earlier in the year. Boze has no other
temporary differences. The enacted tax rate is 30% for 2011 and 40% thereafter. Boze should report the
deferred tax effect of this difference on its December 31, 2011, balance sheet as:
A. A liability of $45,000.
B. A liability of $60,000.
C. An asset of $45,000.
D. An asset of $60,000.

Explanation / Answer

Option A. is the correct answer. Depreciable asset exceeded its tax basis by $150,000 The enacted tax rate is 30% Tax liability = $150,000*30%                    = $45,000 Boze should report the deferred ftax effect of this difference on its December 31, 2011 balance sheet is a liability of $45,000

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