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For its first year of operations,Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows:
Tringali's tax rate is 40%.Assume that no estimated taxes have been paid.
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Tringali's tax rate is 40%.
What should Tringali report as its income tax expense for its first year of operations?

Question

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For its first year of operations,Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows:
  Tringali's tax rate is 40%.Assume that no estimated taxes have been paid.
-
Tringali's tax rate is 40%.
What should Tringali report as its income tax expense for its first year of operations?

Quizplus · Accepted Answer

To calculate Tringali Corporation's income tax expense, we need to determine its taxable income. 
Taxable income = Pretax Accounting Income – Permanent Differences + Temporary Differences
= $350,000 – $60,000 + $10,000
= $300,000
Therefore, Tringali's income tax expense would be:
Income tax expense = Taxable income x Tax rate
= $300,000 x 40%
= $120,000
But since no estimated taxes have been paid, we need to adjust for the difference between the income tax expense and the tax liability.
Tax liability = Taxable income x Tax rate
= $300,000 x 40%
= $120,000
Therefore, the amount payable is:
Tax payable = Tax liability – Estimated taxes paid
= $120,000 – $6,000
= $114,000
So, the correct answer is B.

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