For 2016, Wasabi Company has accounting revenues of $6,000.However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?
A) $400
B) $800
C) $1,200
D) $1,600

Question

Quizplus · Accepted Answer

Taxable income = Accounting revenue - Non-taxable revenue - Expenses
Taxable income = $6,000 - $1,000 - $3,000 = $2,000
Tax payable = Taxable income x Tax Rate = $2,000 x 0.40 = $800. Therefore, the answer is B) $800.

For 2016, Wasabi Company Has Accounting Revenues of $6,000