Question

In its annual income statement, Fox Co. reported incomebefore income taxes of $300,000. Foxestimated that, because of permanent differences, taxable income would be $280,000, and during the year Fox made estimated tax payments of $50,000, which were debitedto income tax expense. Fox is subject to a 30% tax rate. What amount should Fox report as income tax expense?

A. $50,000
B. $84,000
C. $34,000
D. $90,000

Answer 1

B. $84,000

Step-by-step explanation:

The computation of the income tax expense is shown below:

Income before income tax $300,000

Less: Permanent difference -$20,000

Taxable income $280,000

Tax rate is 30%

Income tax expense $84,000 ($280,000 × 30%)

The $50,000 do not impact the overall income tax expense but it decrease the amount of income tax payable