Question

Boxer Corporation earns $105,000 in book income before tax and is subject to a 21 percent Federal income tax rate. Boxer records a single temporary difference. Tax depreciation exceeds book depreciation by $20,000. On its income tax return, Boxer reports a current Federal tax liability of ________.

Answer 1

$17,850

Step-by-step explanation:

since Boxer's tax depreciation exceeded its book depreciation by $20,000, it must report a current tax liability = (total income x tax rate) - (excess depreciation x tax rate)

= ($105,000 x 21%) - ($20,000 x 21%) = $22,050 - $4,200 = $17,850

This means that Boxer has to pay $17,850 in income taxes.