REFERENCE: Ref.08_09
Provo,Inc.has an estimated annual tax rate of 35 percent in the first quarter of 2009.Pretax income for the first quarter was $300,000.At the end of the second quarter of 2009,Provo expects the annual tax rate to be 32 percent because of anticipated tax credits.Pretax income for the second quarter was $350,000.Assume no items in either quarter requiring the net-of-tax presentation.
-How much income tax expense is recognized in the first quarter of 2009?

Question

Quizplus · Accepted Answer

The income tax expense recognized in the first quarter is calculated as follows:
Tax expense = Pretax income x Tax rate
Tax expense = $300,000 x 35% = $105,000

In the second quarter, the expected tax rate is 32%, but this information is not relevant in determining the tax expense for the first quarter. Therefore, the correct answer is (D) $105,000.

REFERENCE: Ref.08_09 Provo,Inc.has an Estimated Annual Tax Rate of 35 Percent in Percent