Alvis Corporation reports pretax accounting income of $580,000, but due to a single temporary difference, taxable income is only $385,000. At the beginning of the year, no temporary differences existed. Required: Assuming a tax rate of 25%, what will be

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Alvis Corporation reports pretax accounting income of $580,000, but due to a single temporary difference, taxable income is only $385,000. At the beginning of the year, no temporary differences existed. Required: Assuming a tax rate of 25%, what will be

Alvis Corporation reports pretax accounting income of $580,000, but due to a single temporary difference, taxable income is only $385,000. At the beginning of the year, no temporary differences existed.

Required:

Assuming a tax rate of 25%, what will be Alvis’s net income?
What will Alvis report in the balance sheet pertaining to income taxes?

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Answer 1

Answer #1

1) pretax account income 580,000

Income tax expenses

Income tax (385,000*25%) -96,250

Deferred tax liability (580,000-385,000)*25% -48,750

Net income 435,000

2) Deferred tax liability 48,750

Income tax liability (payable) 96,250

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Answer 2

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Alvis Corporation reports pretax accounting income of $580,000, but due to a single temporary difference, taxable income is only $385,000. At the beginning of the year, no temporary differences existed. Required: Assuming a tax rate of 25%, what will be

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Alvis Corporation reports pretax accounting income of $580,000, but due to a single temporary difference, taxable income is only $385,000. At the beginning of the year, no temporary differences existed. Required: Assuming a tax rate of 25%, what will be