Final answer:
To calculate Percheron Inc.'s total income tax expense for 2026, we add the current tax expense of $61,000 to the increase in deferred tax asset, which is $29,000 ($59,000 - $30,000). This results in a total income tax expense of $90,000 for the year 2026.
Step-by-step explanation:
The question is asking how much total income tax expense Percheron Inc. should report for the year 2026. The total income tax expense is the sum of the current tax expense and the change in the deferred tax asset.
The current tax expense for 2026 is given as $61,000. To find the change in the deferred tax asset, we need to subtract the deferred tax asset value at the end of 2025 from the one at the end of 2026. The deferred tax asset at December 31, 2025, was $30,000, and at December 31, 2026, it is $59,000. Therefore, the change in deferred tax asset is:
Deferred tax asset at end of 2026 - Deferred tax asset at end of 2025 = Change in deferred tax asset
$59,000 - $30,000 = $29,000 increase
An increase in the deferred tax asset is effectively a reduction in the future tax expense; it is a benefit. Therefore, the increase in the deferred tax asset will reduce the total income tax expense for 2026.
The total income tax expense for 2026 is calculated as follows:
Current tax expense + Increase in deferred tax asset = Total income tax expense
$61,000 + $29,000 = $90,000
Hence, Percheron Inc. should report a total income tax expense of $90,000 for the year 2026.