Question

Southeast Airlines had pretax earnings of $80 million, Included in this amount is income from discontinued operations of $20 million The company's tax rate is 25% 4.5 points What is the amount of income tax expense that Southeast would report in its income statement for continuing operations? (Enter your answer in millions rounded to 2 decimal place (l.e., Le., 5,500,000 should be entered as 5.50). Amount to be deducted should be indicated with a minus sign.) Income from continuing operations before tax Income tax expense Income from continuing operations Income from discontinued operations Net income

Answer 1

1)

(in million $) Income from continuing operations before tax Income tax expense Income from continuing operations Income from discontinued operations Net Income

Income tax expense = 60 million x 25% = 15 million

Income from Discontinued operations = 20 million x ( 1 - 0.25) = 15 million

2)

17469000 31000 Income tax expense Deferred tax asset Income Tax Payable (70m x 25%) (To record income tax provisions for 2021) 17500000

Deferred tax asset = 2 million x 25% = 500000

Deferred tax asset before adjustment (in books) = 469000

Deferred tax asset to be recognized = 500000 - 469000 = 31000

Income tax expense = Income tax payable - Deferred tax asset

= 17500000 - 31000

= 17469000