Giada Foods reported $910 million in income before income taxes for 2018, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $85 million. The company also had non-tax-deductible expenses of $68 million relating to permanent differences. The income tax rate for 2018 was 35%, but the enacted rate for years after 2018 is 40%. The balance in the deferred tax liability in the December 31, 2018, balance sheet is:A. $35 million. B. $16 million. C. $40 million. D. $56 million.

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Business

Calvin Franco

12 July, 17:29

Giada Foods reported $910 million in income before income taxes for 2018, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $85 million. The company also had non-tax-deductible expenses of $68 million relating to permanent differences. The income tax rate for 2018 was 35%, but the enacted rate for years after 2018 is 40%. The balance in the deferred tax liability in the December 31, 2018, balance sheet is:A. $35 million. B. $16 million. C. $40 million. D. $56 million.

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Eduardo Bauer · Answer 1

A. $35 million

Explanation:

Deferred tax liability balance = $85 million*40%

= $35 million

Permanent differences have no effect on deferred taxes liability.