Question

Multiple Choice Question 58 Sandhill Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $3550000 Estimated litigation expense 3945000 Extra depreciation for taxes (6000000) Taxable income $ 1495000 The estimated litigation expense of $3945000 will be deductible in 2018 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2000000 in each of the next 3 years. The income tax rate is 30% for all years.

Income taxes payable is

$448500.

$616500.

$0.

$735000.

Answer 1

Answer : Option A $ 448,500

Explanation;  

Income Tax Expense ($3,550,000 × 30%)	$1,065,000
Change in deferred tax liability ($3,945,000×30%)	$1,183,500
(-) Change in deferred tax asset ($6,000,000× 30%)	$1,800,000
Income Tax Payable	$448,500

OR  

$1,495,000 × 30 % = $448,500