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20 April, 08:15

XYZ began operations in 2018. The company reported $128,000 of depreciation expense on its income statement in 2018 and $84,000 in 2019. On its tax returns, the company deducted $192,000 for depreciation in 2018 and $112,000 in 2019. The 2019 tax return shows a tax obligation (liability) of $132,000 based on a 25% tax rate.

Calculate the income tax expense for 2019.

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  1. 20 April, 09:38
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    The income tax expense for 2019 is $128,000

    Explanation:

    Income tax payable for 2019 is $132,000

    Deferred tax asset for 2018 will be:

    (128,000-112,000) * 25%

    =16000 x 25%

    =$4,000

    Income Tax Expenses for 2019 will be:

    Income tax payable - Deferred Tax asset

    =$132,000 - $4,000

    =$128,000
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