Multiple Choice Question 66

Mitchell Corporation prepared the following reconciliation for its first year of operations:

Pretax financial income for 2015 $ 900,000

Tax exempt interest (75,000)

Originating temporary difference (175,000)

Taxable income $650,000

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2015 is 35%. What amount should be reported in its 2015 income statement as the deferred portion of income tax expense?

$87,500 credit $70,000 debit $87,500 debit $70,000 credit