Caramel Company 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. Th edepreciable 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. The amount of deferred tax liability to be recognized for 2022 is
Caramel Company 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
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. Th edepreciable 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. The amount of
Deferred tax liability refers to underpaid taxes which means the entity has to pay these underpaid taxes in the future. It means the company has fulfilled the tax obligation. The deferred tax liability means a tax due in the future is not recognized yet.
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