Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

$10,200

Explanation:

The computation of the deferred income tax expense or benefit is shown below:

Favorable temporary difference = $50,000

Less:  Unfavorable temporary difference -$20,000

Net favorable temporary difference $30,000

We assume the tax rate is of 34%

So, the deferred tax expense is

= $30,000 × 34%

= $10,200

By finding out the net favorable temporary difference and then multiplied with the tax rate we can get the deferred tax expense and the same is shown above

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