Larson, Inc., hopes to report a total book tax expense of $160,000 in the current year. This $160,000 expense consists of $240,000 in current tax expense and an $80,000 tax benefit related to the expected future use of an NOL by Larson. If the auditors determine that a valuation allowance of $30,000 must be placed against Larson's deferred tax assets, what is Larson's total book tax expense?

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Quizplus · Accepted Answer

The total book tax expense is calculated by adding the current tax expense and adjusting for the valuation allowance. The current tax expense is $240,000, and the tax benefit from the NOL is $80,000. However, a $30,000 valuation allowance reduces the benefit, resulting in a net benefit of $50,000. Therefore, the total book tax expense is $240,000 - $50,000 = $190,000.