Mr. Brightside Company’s income before taxes for financial reporting for 2017, 2018, and 2019 is $100,...
Mr. Brightside Company’s income before taxes for financial reporting for 2017, 2018, and 2019 is $100, $100, and $100. Brightside also recorded an asset for prepaid rent of $90 on its balance sheet in 2017. The rent is to be used evenly over the next two years. The tax rate in 2017 is 30%, in 2018 is 30%, and in 2019 is 20%.
1. What is income tax expense for 2017?
2. What is income tax expense for 2018?
3. What is income tax expense for 2019?
Homework Answers
Solution :
| Computation of income tax expense | |||
| Particulars | 2017 | 2018 | 2019 |
| Income before taxes | $100.00 | $100.00 | $100.00 |
| Prepaid rent | -$90.00 | ||
| Rent expense | $45.00 | $45.00 | |
| Taxable income | $10.00 | $145.00 | $145.00 |
| Income tax payable | $3.00 | $43.50 | $29.00 |
| Deferred tax liability (Reversal) | $22.50 | -$13.50 | -$9.00 |
| Income tax expense | $25.50 | $30.00 | $20.00 |
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