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Reich Inc. generated pretax financial income of $1,210,000 for the year ended 12/31/11. Reich's income tax rate is 35% and its controller has identified the
Reich Inc. generated pretax financial income of $1,210,000 for the year ended 12/31/11. Reich's income tax rate is 35% and its controller has identified the following book/ tax differences relevant to 12/31/11 and the year then ended During 2011, Reich paid and expensed a $260,000 fine that had been assessed by OSHA for violating federal safety standards. For tax, bad debts are only deducted when specific accounts are written off. Reich wrote off $975,000 of accounts receivable in 2011. The allowance for doubtful accounts increased during the year from $550,000 to $635,000. Reich reported a $192,500 DTA- Current at 12/31/10 for this book tax difference . Determine (a) the total amount of income tax expense (current and deferred) to be reported by Reich on its income statement for 2011 and (b) the net deferred tax asset (or liability) to be reported by Reich on its balance sheet as of 12/31/11
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