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.

Question

Mauricio Murray

Business

25 May, 00:53

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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Aaron · Answer 1

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