Question 3

Pharoah Company made the following journal entry in late 2021 for rent on property it leases to Danford Corporation.

Cash142000

Unearned Rent Revenue

142000

The payment represents rent for the years 2022 and 2023, the period covered by the lease. Pharoah Company is a cash basis taxpayer. Pharoah has income tax payable of $222000 at the end of 2021, and its tax rate is 25%.

What amount of income tax expense should Pharoah Company report at the end of 2021?

$115500

$204250

$257500

$186500