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Chapter 19: Question 4BE (page 1093)

At December 31, 2017, Appaloosa Corporation had a deferred tax liability of \(25,000. At December 31, 2018, the deferred tax liability is \)42,000. The corporation鈥檚 2018 current tax expense is $48,000. What amount should Appaloosa report as total 2018 income tax expense?

Short Answer

Expert verified

Current tax expenseis a term used to indicate theamount of tax an organization needs to payfor thecurrent financial year. It isaddedto the amount ofdeferred tax expenseto determine thetotal income tax expenseof the firm.

Step by step solution

01

Given the amounts as

Particulars

Amount

Deferred tax liability in 2017

$25,000

Deferred tax liability in 2018

$42,000

Current tax expense

$48,000

02

Computation of income tax expense for 2018.

Particulars

Amount

Deferred tax liability as on Dec 31, 2018

$42,000

Less: Deferred tax liability as on Dec 31, 2017

$25,000

Deferred tax expense

$17,000

Add: Current tax expense

$48,000

Income tax expense for 2018

$65,000

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