During 2015,its first year of operations,a company recorded depreciation expense of $50,000 for book purposes.For tax purposes during 2015,$100,000 of depreciation expense was deducted.The temporary difference created during 2015 will reverse equally during 2016 and 2017.Book income from operations during the first year was $570,000.The income tax rate is 40%.The income tax expense to be reported in the income statement for the first year of operations is

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The temporary difference of $50,000 will reverse equally during 2016 and 2017, resulting in a reduction of taxable income by $25,000 in each of those years. The income tax expense for 2015 is calculated as follows:Book income from operations: $570,000Add: Depreciation expense for tax purposes: $100,000Taxable income: $670,000Income tax expense: $670,000 x 40% = $268,000Less: Deferred tax liability (25,000 x 40%): $10,000Income tax expense to be reported: $268,000 - $10,000 = $258,000

During 2015,its First Year of Operations,a Company Recorded Depreciation Expense