Creative Corporation's income statement for the year ended December 31,2014,shows pretax income of $300,000.The following items are treated differently on the tax return and in the accounting records:

Assume that Creative's tax rate for 2014 is 40 percent.What is the current portion of Creative's total income tax expense for 2014?

Question

Creative Corporation's income statement for the year ended December 31,2014,shows pretax income of $300,000.The following items are treated differently on the tax return and in the accounting records:

Assume that Creative's tax rate for 2014 is 40 percent.What is the current portion of Creative's total income tax expense for 2014?

Quizplus · Accepted Answer

The current portion of income tax expense is based on the pretax income multiplied by the current tax rate. The items that are treated differently on the tax return and in the accounting records do not affect the current tax expense. Therefore, current portion of income tax expense for Creative Corporation in 2014 is:
$300,000 x 0.40 = $120,000
Since the question asks for the current portion of income tax expense, we choose option C, which is the closest answer to $120,000.

Creative Corporation's Income Statement for the Year Ended December 31,2014,shows