Use the following information for questions.
Lyons Company deducts insurance expense of $84,000 for tax purposes in 2010, but the expense is not yet recognized for accounting purposes.In 2011, 2012, and 2013, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years.Lyons Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2010.There were no deferred taxes at the beginning of 2010.
-What is the amount of income tax expense for 2010?

Question

Quizplus · Accepted Answer

The income tax expense for 2010 is calculated as the sum of income taxes payable and the deferred tax liability. The deferred tax liability arises from the temporary difference of $84,000, which will reverse over the next three years. The deferred tax liability is $84,000 * 40% = $33,600. Therefore, the total income tax expense is $72,000 + $33,600 = $105,600.

Use the Following Information for Questions