Question

Scooter Company began operations in 2019 and, for that calendar year, reported an operating loss of $230,000. Due to sufficient verifiable positive evidence, no valuation allowance was established to reduce the deferred tax asset as of December 31, 2019. During 2020, Scooter reported pretax accounting income of $350,000. Assuming an income tax rate of 30%, what should Scooter record as income tax payable at the end of 2020?

Answer 1

To calculate the income tax payable at the end of 2020, subtract any tax deductible expenses from the pretax accounting income and apply the income tax rate. In this case, Scooter should record $105,000 as income tax payable.

Step-by-step explanation:

To calculate the income tax payable at the end of 2020, we need to determine the taxable income first. The taxable income is the pretax accounting income minus any tax deductible expenses. In this case, Scooter reported pretax accounting income of $350,000 and there is no mention of any tax deductible expenses. Therefore, the taxable income is $350,000.

Next, we apply the income tax rate of 30% to the taxable income. 30% of $350,000 is $105,000. This is the income tax payable at the end of 2020.

So, Scooter should record $105,000 as income tax payable at the end of 2020.