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15 May, 04:41

Plutonic Inc. had $400 million in taxable income for the current year. Plutonic also had a decrease in deferred tax assets of $50 million and recognized tax expense of $80 million. The company is subject to a tax rate of 40%.

The change in deferred tax asset was a/an:A. Increase of $30 millionB. Increase of $130 millionC. Decrease of $30 millionD. Decrease of $130 million

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  1. 15 May, 05:38
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    Deferred tax is increased by $130 million

    Explanation:

    We have given income = $400 million

    Company is subject to a tax rate of 40 %

    So tax rate = 40 %

    So current Tax = $400*40% = $160 Million

    Decrease in deferred tax assets of 50 million result in increase in tax expense

    Hence total Tax Expense = $160+$50 = $210 Million

    But it is given that expense is only $80 million

    So change in deferred tax is increases by = $210 - $80 = $130

    So deferred tax is increases by $130 million
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