Answer:
Deferred tax asset at December 31 2020 i $21,200
Explanation:
Deferred tax asset =warranty costs liability*tax rate
warranty costs liability is $106,000
tax rate is 20%
deferred tax asset=$106,000*20%
=$21,200
The is the future tax implication of the warranty liability,the rationale behind this computation is that when the liability is settled in cash,the settlement would reduce ta liability by $21,200 since warranty liability is deductible when paid in cash.
