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Lyons Company deducts insurance expense of $105,000 for tax purposes in 2019, but the expense is...

Lyons Company deducts insurance expense of $105,000 for tax purposes in 2019, but the expense is not yet recognized for accounting purposes. In 2020, 2021, and 2022, no insurance expense will be deducted for tax purposes, but $35,000 of insurance expense will be reported for accounting purposes in each of these years. Lyons Company has a tax rate of 21% and taxable income of $225,000 at the end of 2019. There were no deferred taxes at the beginning of 2019. What is the amount of income tax expense for 2019?

$69,300
$54,600
$105,000
$90,000
business   accounting   
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Answer #1

Tax expense = current tax + DTL - DTA

= (225000 x .21) + (105000 x .21) - 0

= 47250 + 22050 - 0

= 69300

Note 1 - the taxable incone is given is after the deduction of insurance expense.

Note 2 - the insurance expense is deducted in the year 2019 is for tax purpose but for accounting purposes it will be shown as prepaid expense and deducted proportionately from p&l in 2020,21,22

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