Company A, organized on January 1 2020, had pretax accounting income of $34 million and taxable income of $64 million for the year ended December 31, 2020. The 2020 tax rate is 20%. The only difference between accounting income and taxable income is estimated product warranty costs. This difference is expected to reverse equally over the next 3 years. Assume that scheduled tax rates (based on recently enacted tax legislation) are as follows: 20% in 2021, 25% in 2022 and 2023.
What is Company A's 2020 net income? format(XX.XX) - 2 decimal places
$ Millions | ||
Pretax accounting income | 34.00 | |
Less: Current tax expense | -12.80 | =64*20% |
Add: Tax benefit (for Deferred Tax assets ) | 7.00 | |
Net Income | 28.20 | |
Working: | ||
$ Millions | ||
2021 | 2.00 | =((64-34)/3)*20% |
2022 | 2.50 | =((64-34)/3)*25% |
2023 | 2.50 | =((64-34)/3)*25% |
Total tax benefit | 7.00 | |
Company A, organized on January 1 2020, had pretax accounting income of $34 million and taxable...
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