Use the following information for questions 66 and 67.
Mitchell Corporation prepared the following reconciliation for its first year of operations: The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2015 is 35%.
-In Mitchell's 2015 income statement, what amount should be reported for total income tax expense?

Question

Use the following information for questions 66 and 67.
Mitchell Corporation prepared the following reconciliation for its first year of operations:  The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2015 is 35%.
-In Mitchell's 2015 income statement, what amount should be reported for total income tax expense?

Quizplus · Accepted Answer

To calculate the total income tax expense for 2015, we need to calculate the current portion of income tax expense and deferred portion of income tax expense.

Current portion of income tax expense: 
Taxable income for 2015 = $1,500,000 - $300,000 = $1,200,000 
Income tax payable for 2015 = $1,200,000 × 35% = $420,000

Deferred portion of income tax expense: 
Deferred tax liability as of December 31, 2015 = $200,000 × 40% = $80,000 
Change in deferred tax liability during 2015 = $20,000 
Deferred tax expense for 2015 = $80,000 - $20,000 = $60,000

Total income tax expense for 2015 = current portion of income tax expense + deferred portion of income tax expense = $420,000 + $60,000 = $480,000 
However, the question asks for the amount to be reported in the income statement, which is the current portion of income tax expense. Therefore, the correct answer is C) $315,000, the reported amount of the current portion of income tax expense.

Use the Following Information for Questions 66 and 67