Question

1)Information for Kent Corp. for the year 2016:

Reconciliation of pretax accounting income and taxable income:

Pretax accounting income	$181,000
Permanent differences	(15,400)
	165,600
Temporary difference-depreciation	(12,800)
Taxable income	$152,800

Cumulative future taxable amounts all from depreciation temporary differences:
     
  As of December 31, 2015   $12,600
   As of December 31, 2016   $25,400

The enacted tax rate was 20% for 2015 and thereafter.

What should Kent report as the current portion of its income tax expense in the year 2016?

2)Information for Kent Corp. for the year 2016:

Reconciliation of pretax accounting income and taxable income:

Pretax accounting income	$174,000
Permanent differences	(14,800)
	159,200
Temporary difference-depreciation	(11,500)
Taxable income	$147,700

Cumulative future taxable amounts all from depreciation temporary differences:

  As of December 31, 2015   $12,500
  As of December 31, 2016   $24,300

The enacted tax rate was 36% for 2015 and thereafter.

What would Kent's income tax expense be in the year 2016?

Answer 1

1. Kent report as the current portion of its income tax expense in the year 2016

Taxable income X Tax Rate for 2016

$152,800 X 20% = $30,560

2.Kent's income tax expense be in the year 2016

We need to first compute the deffered Tax Liability

Deffered Tax Liability = [($24,300 X 36%) - ($12,500 X 36%)]

=$8748 - $4500 = $4248

Now lets compute income tax expense for the year 2016

Income Tax Expense = $147,700 X 36% = $53,172

So income tax expense for the year 2016 = $53,172 +$ 4,248 = $57,420