Southeast Airlines had pretax earnings of $30 million, including a gain on disposal of a discontinued operation of $5 million. The company's tax rate is 40%. What is the amount of income tax expense that Southeast should report in its income statement?

Question

Business

Heather

24 January, 16:51

Southeast Airlines had pretax earnings of $30 million, including a gain on disposal of a discontinued operation of $5 million. The company's tax rate is 40%. What is the amount of income tax expense that Southeast should report in its income statement?

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Answers (1)

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Ricardo Oconnell · Answer 1

Income tax expense of $14 million should report in the income statement

Explanation:

Southeast Airline should report the income on the basis of their earning in the year.

Earning Before Tax = $30 Million

Tax on Earning Before Tax = $30 Million x 40% = $12 million

Gain on disposal = $5 million

Tax on Gain on disposal = $5 million x 40% = 2 million

Total Income tax = $12 million + $2 million = $14 million

Another way

Total Income tax = ($30 million + $5 million) x 40% = $14 million