Current Tax Liability

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  • #1601553
    PackerBacker12
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    Venus Corp.’s worksheet for calculating deferred income taxes for 20X1 follows:

    20X1 20X2 20X3
    ——- ——- ——-
    Pretax income $1,400 0 0
    Temporary differences:
    Depreciation (800) (1,200) $2,000
    Warranty costs 400 (100) (300)
    ——- ——- ——-
    Taxable income $1,000 (1,300) 1,700

    Loss carryback (1,000) 1,000
    Loss carryforward 300 (300)
    ——- ——- ——-
    $ 0 $ 0 $1,400
    ======= ======= =======
    Enacted rate 30% 30% 25%
    Deferred tax liability
    (asset):
    Noncurrent $ 50
    =======

    Venus had no prior deferred tax balances. In its 20X1 income statement, what amount should Venus report as current income tax expense?
    A. $420
    B. $350
    C. $300
    D. $0

    Why is the answer not D? If they had taxable income of 1,000 and a loss carryback of 1,000 wouldn’t their taxable income therefore be O?

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