Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is Nocera's total income tax expense reported on its financial statements for 2010?

Question

Quizplus · Accepted Answer

First, we need to determine the taxable income. Since the first-year tax depreciation exceeds book depreciation by $120,000, the taxable income will be higher than the book income by that amount. Therefore, the taxable income will be $720,000 ($600,000 + $120,000).
Next, we need to calculate the income tax expense by applying the tax rate of 35% to the taxable income. Thus, the income tax expense will be $252,000 ($720,000 x 35%).
Therefore, the total income tax expense reported on Nocera's financial statements for 2010 is $210,000 ($252,000 - $42,000, which is the excess tax depreciation over book depreciation). Hence, the answer is B).