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The following information is available for Kessler Company after its first year of operations: Income before taxes $250,000 Federal income tax payable $104,000 Deferred income
The following information is available for Kessler Company after its first year of operations: Income before taxes $250,000 Federal income tax payable $104,000 Deferred income tax (4,000) Income tax expense 100,000 Net income $150,000 Kessler estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $105,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims? a. $115,000 b. $100,000 c. $105,000 d. $95,000 THE ANSWER WILL BE 104000-(4000/40)=95000 I KNOW THE 4000/40 MIGHT BE Deferred tax liability (or asset) , BUT WHY USE 104000 AND -(4000/40), COULD YOU EXPLAIN THE ANSWER ? THANK YOU
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