Alvis Corporation reports pretax accounting income of $540,000, but due to a single temporary difference, taxable...
Alvis Corporation reports pretax accounting income of
$540,000, but due to a single temporary difference, taxable
income is only $355,000. At the beginning of the year, no
temporary differences existed.
Required:
1. Assuming a tax rate of 40%, what will be
Alvis’s net income?
2. What will Alvis report in the balance sheet
pertaining to income taxes?
Homework Answers
| 1 | Pretax accounting income | $540,000 |
| Income Tax Expenses | ||
| Income Tax ($355,000 x 40%) | $142,000 | |
| Deferred tax liabiltiy [($540,000 - $355,000) x 40%] | $74,000 | |
| Net Income | $324,000 | |
| 2 | As per the balance sheet:- | |
| Deferred tax liability | $74,000 | |
| Income tax liability | $142,000 | |
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