DTA Question

CFA Level I
#1

The following information is available about a company:

**($ thousands)****2013 **2012 Deferred tax assets 200 160 Deferred tax liabilities −450 −360 Net deferred tax liabilities −250 −200 Earnings before taxes 4,000 3,800 Income taxes at the statutory rate 1,200 1,140 Income tax payable (Current income tax expense) 1,000 900

The company’s 2013 income tax expense (in thousands) is closest to:

  1. $1,250.
  2. $950.
  3. $1,050.

can you explain the question please?

#2

Is the answer 3?

Income tax expense = Taxes payable + (change in DTL - change in DTA)

Current income tax (taxes payable) = $1,000

Net change in DTA and DTL is 50. This is because the net change increase from 200 to 250

So Income tax expense = 1000 + 50 (net increase in DTL) = 1050