Question

The books of the Speedster Company for the year ended December 31, 2014, showed pretax income of $295,000. In computing the taxable income for federal income tax purposes, the following timing differences were taken into account:

Depreciation deducted for tax purposes in excess of depreciation recorded on the books ................... $14,500

Income from installment sale reportable for tax purposes in excess of income recognized on the books .......... 11,500

What should Speedster record as its current federal income tax liability at December 31, 2014, assuming a corporate income tax rate of 30 percent?

                A             $80,700

                B             $87,600

                C             $89,400

                D             $84,700

Please show work, thank you

Answer 1

Particulars	Amount
Pretax income	$295,000
(Less): Depreciation for tax purpose	($14,500)
Add: Income from installment sale	$11,500
	$292,000
Tax Rate	30%
Current federal income tax liability	$87,600

Option B. $87,600