Question

Earnings Before Taxes of $100,000, a Deferred Tax Liability (DTL) at the beginning of the year of 3,000 and an ending DTL of 11,000. If the tax liability on the tax return is $25,000 and Crunchers' tax rate is 35%, how much Income Tax Expense will Crunchers report on its Income Statement

Answer 1

Answer:Income Tax Expense = $33000

Step-by-step explanation:

Tax Liability on the Tax return = $25000

Deferred Tax Liability incurred = Ending Balance - Opening Balance

Deferred Tax Liability incurred = $11000 - $3000

Deferred Tax Liability incurred = $8000

Income Tax Expense for the year is made up of Income tax liability as per tax return plus Deferred Tax Liability incurred in the current year

Income Tax Expense = $25000 + $8000

Income Tax Expense = $33000

Crunchers will report an income tax expense of $33000 in their Income statement