Description
(TCO
B) Hertz Co. prepared the following reconciliation of its pretax
financial statement income to taxable income for the year ended December
31, 2013, its first year of operations:
Pretax financial income $300,000
Nontaxable interest received on municipal securities (15,000)
Estimated warranties not deductible for tax purpose in 2013 35,000
Depreciation in excess of financial statement amount (30 ,000)
Taxable income $290,000
Hertz’s tax rate for Year 2013 and for future years is 40%.
(a) In its Year 1 income statement, what amount should Hertz report as income tax expense-current portion?
(b) In its December 31, 2013 balance sheet, what amount should Hertz report as deferred income tax liability/asset?
Explanation & Answer
Hertz Co.
1
[Student’s Name]
[Instructor’s Name]
[Course Name and Number]
[Date]
Hertz Co.
a. Income Tax Expense
Hertz can calculate the income tax payable – current option using the formula:
Income tax expense = (Pretax income -Tax-exem...
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