Answered: company's current and deferred income…

Business

Accounting

company's current and deferred income tax expense or benefit.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 3RE: In the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During...

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Concept explainers

Filing Federal Income Tax Return

A tax is the amount of money paid to the government on the revenue earned by the individual or business organization. It acts as an income for the government and an expense for the individual or business organization. There are different regulations regarding filing an income tax return in other countries.

Question

Drew Corporation reported pretax book income of $625,000. Tax depreciation exceeded book depreciation by $100,200. In addition, the reserve for warranties increased by $40,550. Price had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. At the beginning of the year, Congress reduced the corporate tax rate from 34 percent to 21 percent. Compute the company's current and deferred income tax expense or benefit.

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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