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14 March, 06:06

Gravel, Inc., earns book net income before tax of $600,000. Gravel puts into service a depreciable asset this year, and its first-year tax depreciation exceeds book depreciation by $120,000. Gravel has recorded no other temporary or permanent book-tax differences. Assuming that the U. S. tax rate is 21%, what is Gravel's current income tax expense reported on its GAAP financial statements?

a.$151,200

b.$25,200

c.$100,800

d.$126,000

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  1. 14 March, 07:12
    0
    c.$100,800

    Explanation:

    Deferred tax refers to timing and temporary difference between accounting and tax bases.

    From the question, since the tax depreciation is greater by $120,000, tax expense becomes ($600,000-$120,000) x 21%
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