Asked by Carlos Orellana on Jun 21, 2024
Verified
A company reported income taxes payable of $99,700,an increase in deferred tax assets of $19,900,and a decrease in deferred tax liabilities of $9,550;therefore book income tax expense equals $70,250.
Deferred Tax Assets
Financial items on a company's balance sheet that can be used to reduce future tax liability.
Deferred Tax Liabilities
Future tax liabilities arising from temporary differences between the book value and the tax basis of assets and liabilities.
Book Income Tax Expense
The amount of income tax expense that is reported in the financial statements, which may differ from actual taxes paid due to timing or differences in accounting and tax rules.
- Comprehend the fundamentals of calculating income tax expense in financial statements.
- Comprehend the impact of deferred tax assets and liabilities on financial report assessment.
Verified Answer
Book income tax expense = Income taxes payable + Increase in Deferred Tax Assets - Decrease in Deferred Tax Liabilities
Substituting the given values:
Book income tax expense = $99,700 + $19,900 - $9,550 = $70,250. Therefore, the statement is true.
Learning Objectives
- Comprehend the fundamentals of calculating income tax expense in financial statements.
- Comprehend the impact of deferred tax assets and liabilities on financial report assessment.
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