Miro Co. began business on January, 2, year 2. Miro used the double-declining balance method of depreciation for financial statement purposes for its building, and the straight-line method for income taxes. On January 16, year 4, Miro elected to switch to the straight-line method for both financial statement and tax purposes. The building cost $240,000 in year 2, which has an estimated useful life of 16 years and no salvage value. Data related to the building is as follows:
Year…….Double-declining……..Straight line
Year 2…..$30,000………………..$15,000
Year 3….. 26,250…………………15,000
Miro’s tax rate is 40%. Which of the following statements is correct?
A There should be no reduction in Miro’s deferred tax liabilities or deferred tax assets in year 4.
B Miro’s deferred tax liability should be reduced by $1,875 in year 4.
C Miro’s deferred tax asset should be reduced by $10,500 in year 4.
D Miro’s deferred tax asset should be decreased by $750 in year 4. (correct answer)
>> i don't understand how they get answer D. How do you get $750?
BEC: 65 - 79* - 84 DONE
AUD: 65 - 76 DONE
REG: 63 - 77 DONE
FAR: 65 - 63 - 67 - 69 - 73 - 71 - 83 DONE
Becker Notes & Flashcards, Wiley Test Bank, Ninja MCQ
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