Current portion of income tax equals taxable income X the tax rate. The way I calculate it is as follows:
Pretax Accounting Income……………………………..300,000
Add: Accounting Depreciation………………………….70,000
Less: Tax Depreciation…………………………………..(95,000)
Less: Accounting Royalty Income…………………….(50,000)
Add: Tax Royalty Income…………………………………80,000
Add: Accounting Bad Debt Expense…………………12,000
Less: Tax Bad Debt Expense…………………………..(7,000)
Add: Accounting Life Insurance Premiums………….5,000 – Permanent Difference, Deductible for Book, not tax
Less: Accounting Life Insurance Proceeds……….(20,000) – Included in Book Income, Never taxed
Equals: Current Taxable Income……………………..295,000
Times: Tax Rate………………………………………………….30%
Equals: Current portion of income tax expense…..88,500
Some people find it easier to net the numbers and, for example, deduct 25,000 for the difference in depreciation, but I prefer to do it this way when all the information is given.
FAR - 91
AUD - 88
BEC - 86
REG - 79
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