A company's income statement reported net income of $80,000 during 2014.The income tax return excluded a revenue item of $6,000 (reported on theincome statement) because under the tax laws the $6,000 would not bereported for tax purposes until 2015. Which of the following statements isincorrect assuming a 35% tax rate?Income tax expense on the income statement exceeds the tax liability tothe IRS.The $6,000 of revenue creates a deferred tax liability.A $2,100 deferred tax liability is reported as of December 31, 2014.Income tax expense on the income statement is $25,900.

Income statement shows the net income or net loss that is calculated by deducting the expenses from…

Answered: A company's income statement repo The…

A company's income statement repo The income tax return excluded a rev income statement) because under th reported for tax purposes until 2015. incorrect assuming a 35% tax rate?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

A company's income statement reported net income of $80,000 during 2014.
The income tax return excluded a revenue item of $6,000 (reported on the
income statement) because under the tax laws the $6,000 would not be
reported for tax purposes until 2015. Which of the following statements is
incorrect assuming a 35% tax rate?
Income tax expense on the income statement exceeds the tax liability to
the IRS.
The $6,000 of revenue creates a deferred tax liability.
A $2,100 deferred tax liability is reported as of December 31, 2014.
Income tax expense on the income statement is $25,900.

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Income from Continuing Operations
Acc
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