Question

In its annual income statement, Fox Co. reported income before income taxes of $300,000. Fox estimated that, because of permanent differences, taxable income would be $280,000, and during the year Fox made estimated tax payments of $50,000, which were debited to income tax expense. Fox is subject to a 30% tax rate. What amount should Fox report as income tax expense?

Answer 1

In total 84,000 income tax will be reported.

Step-by-step explanation:

taxable income 280,000

tax rate: 30%

tax expense: taxable income x tax rate:

280,000 x 30% = 84,000

The company already expected 50,000 tax income:

income tax expense 50,000 debit

cash 50,000 credit

So it will adjust for the difference: 84,000 - 50,000 = 34,000

income tax expense 34,000 debit

income tax payable 34,000 credit

In total 84,000 income tax will be reported.