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Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax
Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $ 800,000 2,000,000 (1,600,000) $ 1.200.000 The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years. The income tax expense is $240,000 $360,000 $400,000 $800,000
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