Question

For the current year ($ in millions), Centipede Corp. had $90 in pretax accounting income. This included warranty expense of $8 and $19 in depreciation expense. 7 million of warranty costs were incurred, and MACRS depreciation amounted to $42. In the absence of other temporary or permanent differences, what was Centipede's income tax payable currently, assuming a tax rate of 40%? a) 18.6 Millionb) 24.0 Millionc) 27.2 Milliond) 32.8 Million

Answer 1

27.2 Million

Step-by-step explanation:

Taxable Income = pretax accounting income + warranty expense + depreciation expense - warranty costs were incurred - MACRS depreciation

Taxable Income = 90 + 8 + 19 - 7 - 42

Taxable Income = $ 68

Centipede's income tax payable = Taxable Income*tax rate

Centipede's income tax payable = 68*40%

Centipede's income tax payable = $ 27.20 Million

Therefore the answer c) 27.2 Million