Caramel Co. at the end of 2022, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income -$3,000,000 Estimated litigation expense- 4,000,000 Excess tax depreciation- (6,000,000) Taxable Income- $1,000,000 The estimated litigation expense of $4,000,000 will be deductible in 2023 when it is expected to be paid. The depreciable assets will result in deductible amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. Income taxes payable for 2022 is
Caramel Co. at the end of 2022, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income -$3,000,000
Estimated litigation expense- 4,000,000
Excess tax depreciation- (6,000,000)
Taxable Income- $1,000,000
The estimated litigation expense of $4,000,000 will be deductible in 2023 when it is expected to be paid. The
Income taxes payable for 2022 is
Costs related to litigation include those incurred during court appearances and when disputes or lawsuits are settled. When engaging in legal proceedings, whether as plaintiffs or defendants, individuals, firms, or organizations may suffer these costs.
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