If income tax expense reported on the income statement is $45,000 for 2010,and the tax return for 2010 (the first year)shows an income tax liability of $42,000,the deferred income tax on the balance sheet at the end of 2010 will be which of the following? Assume a 40% tax rate.
A)A $3,000 liability.
B)A $3,000 asset.
C)A $7,500 liability.
D)A $7,500 asset.

Question

Quizplus · Accepted Answer

The income tax expense ($45,000) on the 2010 income statement equals the IRS tax liability ($42,000) plus the deferred income tax liability ($3,000) that was created during 2010.

If Income Tax Expense Reported on the Income Statement Is