Question
At the end of 2020, its first year of operations, Ontario Corp. prepared the following reconciliation between pretax accounting income and taxable income: Pre-tax accounting
At the end of 2020, its first year of operations, Ontario Corp. prepared the following reconciliation between pretax accounting income and taxable income:
Pre-tax accounting income $ 300,000
Estimated lawsuit expense 750,000
Installment sales profit (600,000)
Taxable income $450,000
The estimated lawsuit expense of $750,000 will be deductible in 2022 when it is expected to be paid. The installment sales profit will be collected at $300,000 in each of the next two years. The income tax rate is 30% for all years. The total income tax expense to be reported on the income statement is:
a. $90,000.
b. $135,000.
c. $150,000.
d. $300,000.
e. $225,000.
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
324300980, 978-0324300987
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