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Taylor Company began manufacturing operations on January 2, 2018. During 2018 Taylor reported pre-tax book income...

Taylor Company began manufacturing operations on January 2, 2018. During 2018 Taylor reported pre-tax book income of $150,000 and had taxable income of $200,000. Taylor had a temporary difference relating to accrued product warranty costs which are expected to be paid as follows:

2019 $ 30,000
2020 $ 15,000
2021 $ 5,000

Income tax expense for 2018 is:

Multiple Choice

  • $43,000.

  • $65,000.

  • $67,000.

  • $45,000.

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Answer #1

2018 0 (.3)
2019 $ 30,000 (.3)
2020$ 15,000 (.4) = 17,000 def. asset
2021 $ 5,000 (.4)

Income tax expense = income tax payable ($60,000) − deferred tax asset ($17,000) = $43,000

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