P 14 Mini, Inc., earns pretax book net income of $750,000 in 2021, its first year of operations. Mini recognized $20,000 in bad debt expense forbook purposes. This expense is not yet deductible for tax purposes.Mini reports $800,000 of pretax book net income in 2022. Mini did not recognize any bad debt expense for book purposes in 2022 but diddeduct $15,000 in bad debt expense for tax purposes. Mini reports no other temporary or permanent book-tax differences. The applicableU.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 4%.Enter below the 2022 end-of-year balance in Mini's deferred tax benefit or expense and total tax benefit or expense.If an amount is zero, enter "0". If required, round your answers to the nearest dollar.a. Total tax benefit or expenseb. Deferred tax benefit or expense$$2022Xc. In net present value terms, what has been the cost to Mini of the deferred tax deduction for bad debts? The present value factor at 8%is 0.9615.$

Deferred tax benefit refers to the form of an asset reflect on the balance sheet of a company that…

Answered: O of pretax book net income in 2022.…

O of pretax book net income in 2022. Mini did d debt expense for tax purposes. Mini reports e income tax rate is 21%, and Mini earns an a 2 end-of-year balance in Mini's deferred tax ber

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 14P

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

P 14

Mini, Inc., earns pretax book net income of $750,000 in 2021, its first year of operations. Mini recognized $20,000 in bad debt expense for
book purposes. This expense is not yet deductible for tax purposes.
Mini reports $800,000 of pretax book net income in 2022. Mini did not recognize any bad debt expense for book purposes in 2022 but did
deduct $15,000 in bad debt expense for tax purposes. Mini reports no other temporary or permanent book-tax differences. The applicable
U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 4%.
Enter below the 2022 end-of-year balance in Mini's deferred tax benefit or expense and total tax benefit or expense.
If an amount is zero, enter "0". If required, round your answers to the nearest dollar.
a. Total tax benefit or expense
b. Deferred tax benefit or expense
$
$
2022
X
c. In net present value terms, what has been the cost to Mini of the deferred tax deduction for bad debts? The present value factor at 8%
is 0.9615.
$

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