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Topic
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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) 1,700Loss 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. $0Why 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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