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William Company reported $550,000 in financial (book) income before taxes for Year 3. Tax depreciation for the year exceeded book depreciation by $50,000. The tax rate for Year 3 was 30%, and Congress enacted a tax rate of 40% for years after year 3.
1. What is the deferred tax reported on William's December 31, Year 3 balance sheet?
a. $15,000 deferred tax asset
b. $15,000 deferred tax liability
c. $20,000 deferred tax asset
d. $20,000 deferred tax liability
2. Hoe much is the income tax expense reported on William's income statement for Year 3?
a. $120,000
b. $125,000
c. $150,000
d. $170,000
3. If William paid no estimated taxes, what is the amount of income tax payable reported on William's balance sheet at December 31, Year 3?
a. $120,000
b. $122,500
c. $150,000
d. $170,000
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The solution explains various multiple choice questions relating to income taxes
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1. Since the book income is higher there will be a deferred tax liability. The tax liability will be based on the enacted rate for the later years.
The amount of ...
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