Question
At the end of 2020, its first year of operations, Ontario Corp. prepared the following reconciliation between pre-tax 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 pre-tax accounting income and taxable income:
Pre-tax accounting income $ 300,000
Estimated lawsuit expense 750,000
Instalment 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 instalment 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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