Ask Question
30 May, 17:53

Mahaffey Enterprises has a temporary difference resulting in future deductible amounts of $500,000, income taxes payable of $800,000, and a tax rate of 20 percent. What should they record as their income tax expense for this period?

+3
Answers (2)
  1. 30 May, 18:20
    0
    Answer: Income tax expense $700,000

    Explanation: Income taxes payable is equal to the sum of the income tax expense and the deferred tax asset.

    Income taxes payable = $800,000

    future deductible amounts = $500,000

    Tax rate = 20% (0.2)

    Firstly, calculate

    deferred tax asset = (future deductible amounts x Tax rate)

    deferred tax asset = $500,000 x 0.2

    deferred tax asset = $100,000

    Then, calculate the income tax expensive.

    Income tax expense = (Income taxes payable - deferred tax asset)

    Income tax expense = ($800,000 - $100,000)

    Income tax expense = $700,000
  2. 30 May, 18:21
    0
    Answer: $700,000

    Explanation:

    Given the following;

    Income tax payable = $800,000

    Future deductible amount = $500,000

    Tax rate = 20%

    Deferred tax asset (usually used to cut down taxable income due to incurred losses in a business)

    Deferred tax = tax rate * future deductible amount

    Deferred tax asset = (20:100) * 500,000

    Deferred tax asset = 0.2 * 500,000

    Deferred tax asset = $100,000

    Therefore, income tax expense for this period Is;

    Income taxes payable - deferred tax asset = $800,000 - $100,000

    Income tax expense = $700,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Mahaffey Enterprises has a temporary difference resulting in future deductible amounts of $500,000, income taxes payable of $800,000, and a ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers