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Multiple Choice

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

Solution Preview

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 ...

Solution Summary

The solution explains various multiple choice questions relating to income taxes