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Mozart Inc.$$s $$98,000$ taxable income for $20$X$1$ will be taxed at the $21\%$ corporate tax rate. For tax purposes, its depreciation expense exceeded the depreciation used for financial reporting purposes by $$27,000.$ Mozart has $$45,000$ of purchased goodwill on its books; during $20$X$1,$ the company determined that the goodwill had suffered a $$3,000$ impairment of value for financial reporting purposes. None of the goodwill impairment is deductible for tax purposes. Mozart purchased a three$-$year corporate liability insurance policy on July $1,20$X$1,$ for $$36,000$ cash. The entire premium was deducted for tax purposes in $20$X$1.$

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Required:

Determine Mozart$$s pre$-$tax book income for $20$X$1.$

Determine the changes in Mozart$$s deferred tax amounts for $20$X$1.$

Calculate tax expense for Mozart Inc. for $20$X$1.$

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$($$ in thousands$)20$X$1$Pre$-$tax income$$1,000$Permanent differences:$$Goodwill impairment$400$Interest on municipal bonds$(200)$Temporary differences:$$Depreciation$(800)$Warranty costs$400$Rent received in advance$600$Taxable income$$1,400$

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The enacted tax rate for $20$X$1$ is $21\%,$ but it is scheduled to increase to $25\%$ in $20$X$2$ and subsequent years. All temporary differences are originating differences. Metge had no deferred tax assets or deferred tax liabilities at December $31,20$X$0.$

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Required:

Determine Metge$$s $20$X$1$ taxes due.

What is the change in deferred tax assets $($liabilities$)$ for $20$X$1?$

Determine tax expense for $20$X$1.$

Provide a schedule that reconciles Metge$$s statutory and effective tax rates $($in both percentages and dollar amounts$)$ for $20$X$1.$

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