Question - At the beginning of 2012, Dolly, Inc. has a deferred tax asset of $5,000 and deferred tax liability of $9,000. In 2012, pretax financial income was $725,000 and the tax rate was 40%.
Pretax income included:
Interest income from municipal bonds $30,000
Accrued warranty costs, estimated to be used in 2013 $96,000
Prepaid rent expense, will be used in 2013 $18,000
Installment sales revenue, to be collected in 2013 $34,000
Operating loss carryforward $52,000
What is the adjustment needed to correct the balance of deferred tax asset for 2012?
$38,400 DR
$20,800 CR
$20,800 DR
$33,400 DR