for the Zeff Company prepared first year of operations: 1,600,000 Pretax financial income Nontaxable interest received Long-term loss accrual in excess of deductible amount Depreciation in excess of financial depreciation ( 50,000) 100,000 ( 250,000) 1,400,000 Taxable income (Tax rate is 30%)

for the Zeff Company prepared first year of operations: 1,600,000 Pretax financial income Nontaxable interest received Long-term loss accrual in excess of deductible amount Depreciation in excess of financial depreciation ( 50,000) 100,000 ( 250,000) 1,400,000 Taxable income (Tax rate is 30%)

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4BCRQ

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

100%

Zeff Company prepared the following reconciliation for the
· first year of operations:
1,600,000
Pretax financial income
Nontaxable interest received
Long-term loss accrual in excess of deductible amount
Depreciation in excess of financial depreciation
( 50,000)
100,000
( 250,000)
1,400,000
Taxable income (Tax rate is 30%)
What amount should be reported as total income tax
expense?
a. 495,000
b. 480,000
c. 465,000
d. 420,000
What amount should be reported as deferred tax liability
a. 90,000
b. 45,000
с. 75,000
d. 30,000
What amount should be reported as deferred tax asset?
a. 30,000
b. 90,000
c. 45,000
d. 75,000

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