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ABC started its operations in 2018 and reported income before tax expense of $550,000 under GAAP....

ABC started its operations in 2018 and reported income before tax expense of $550,000 under GAAP. Tax depreciation for the year exceeded GAAP depreciation by $50,000 which is the only item that created a temporary difference between book (GAAP) and taxable income. Assume that the tax rate 30% will stay the same for the current and future periods. What is the current tax expense reported in the GAAP income statement for 2018 (show work)?

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Answer #1

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--Current tax expense = Taxable Income x tax rate
>Taxable Income = $ 550000 - $ 50000 excess depreciation as per GAAP = $ 500000

--Current Tax Expense = $ 500,000 x 30%
= $ 150,000 Answer

>Note: Deferred tax would be $ 50000 x 30% = $ 15000 recorded as Deferred tax Liability.

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