Question

For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows:Pretax accounting income $ 300,000Permanent difference (15,000 )285,000Temporary difference-depreciation (20,000 )Taxable income $ 265,000 Tringali's tax rate is 40%. Assume that no estimated taxes have been paid.What should Tringali report as income tax payable for its first year of operations?$106,000.$120,000.$8,000.$114,000.

Answer 1

option C

Step-by-step explanation:

given,

Pretax accounting income $300,000

Permanent difference ( 15,000)

285,000

Temporary difference-depreciation (20,000)

Taxable income $265,000

Tringali's tax rate = 40 %

Deferred tax only created on temporary difference :

in this question temporary difference is $20,000

deferred income tax liability = temporary difference x tax rate

= $20,000 x 40%

= $20,000 x 0.4

= $8,000

Hence, the correct answer is option C