In its 2017 income statement, Tow Inc. reported proceeds from an officers life insurance policy...
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Accounting
In its 2017 income statement, Tow Inc. reported proceeds from an officers life insurance
policy of $90,000 and depreciation of $250,000. Tow was the owner and beneficiary of the
life insurance on its officer. Tow deducted depreciation of $370,000 in its 2017 income tax
return. The tax rate is 35%. Data related to the reversal of the excess tax deduction for depreciation
follow:
Year Reversal of Excess
Tax Deduction for Depreciation
2018 $50,000
2019 40,000
2020 20,000
2021 10,000
Tow has no other temporary differences and it had no deferred tax assets or liabilities at
December 31, 2016.
Required:
In its December 31, 2017, balance sheet, what amount should Tow report as a deferred tax
liability?
Answer: defered tax liability -Is it $42,000
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