Chapter 16, Problem 16.1E

Temporary difference; taxable income given

• LO16–1

Alvis Corporation reports pretax accounting income of $400,000, but due to a single temporary difference, taxable income is only $250,000. At the beginning of the year, no temporary differences existed.

Required:

1. Assuming a tax rate of 35%, what will be Alvis’s net income?

2. What will Alvis report in the balance sheet pertaining to income taxes?