For the year ended December 31, 2016, the Bowling Green Company reported income of $350,000 before provision for income tax. In arriving at taxable income for income tax purposes, the following differences were identified: Bad debt expense but not written off) $ 8,000
Depreciation deducted for tax purposes in excess of
Depreciation for accounting purposes 50,000
Income for installment sales reportable for income tax purposes in excess of income reported for financial
Reporting purposes 30,000
Assuming a corporate income tax rate of 30%, Huntsville's current income tax liability as of December 31, 2016, is

Question

Quizplus · Accepted Answer

To calculate the current income tax liability, we first need to adjust the reported income for the differences to find the taxable income. The adjustments are as follows:1. Bad debt expense of $8,000 is not deductible until written off, so it increases taxable income.2. Depreciation for tax purposes exceeds accounting depreciation by $50,000, reducing taxable income.3. Income for installment sales is higher by $30,000 for tax purposes, increasing taxable income.Therefore, the adjustments to income are: +$8,000 - $50,000 + $30,000 = -$12,000.Reported income: $350,000Adjustments: -$12,000Taxable income: $338,000Tax liability = Taxable income * Tax rate = $338,000 * 30% = $101,400.

For the Year Ended December 31, 2016, the Bowling Green