Phyllis, Inc., earns book net income before tax of $600,000. Phyllis puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Phyllis has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is Phyllis's total income tax expense reported on its GAAP financial statements?
A)$252,000
B)$210,000
C)$168,000
D)$42,000

Question

Quizplus · Accepted Answer

To calculate total income tax expense, we need to first find taxable income by adjusting book income for the difference in depreciation:
Book income before tax = $600,000
Add: Temporary tax difference = $120,000
Taxable income = $720,000
Total income tax expense = Taxable income x Tax rate
Total income tax expense = $720,000 x 0.35
Total income tax expense = $252,000
Therefore, the answer is B: $210,000.