Question
For Year 2, Woozie Inc. reported depreciation of $600,000 in its income statement. On its Year 2 income tax return, Woozie reported depreciation of $900,000.
For Year 2, Woozie Inc. reported depreciation of $600,000 in its income statement. On its Year 2 income tax return, Woozie reported depreciation of $900,000. Woozies income statement also included $100,000 accrued warranty expense that will be deducted for tax purposes when paid. Woozies enacted tax rates are 30% for Year 2 and Year 3, and 25% for Year 4 and Year 5. The depreciation difference and warranty expense will reverse over the next three years as follows:
Depreciation difference | Warranty expense | |
Year 3 | $ 140,000 | $ 35,000 |
Year 4 | 100,000 | 40,000 |
Year 5 | 60,000 | 25,000 |
Total | $ 300,000 | $ 100,000 |
These were Woozies only temporary differences. In Clark's Year 2 income statement, the deferred portion of its provision for income taxes should be:
- A.
$120,000
- B.
$55,250
- C.
$60,000
- D.
$108,750
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started