North,Inc. ,earns book net income before tax of $500,000 in 2010.In computing its book income,North deducts $50,000 more in warranty expense for book purposes than allowed for tax purposes.North has no other temporary or permanent differences.Assuming the U.S.tax rate is 35% and no valuation allowance is required,what is North's total income tax expense reported on its financial statements for 2010?

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Quizplus · Accepted Answer

North's taxable income is $500,000 + $50,000 = $550,000. Its tax expense is $550,000 * 35% = $192,500. However, since North deducted $50,000 more in warranty expense for book purposes than allowed for tax purposes, its book income is $500,000 - $50,000 = $450,000. Its book tax expense is $450,000 * 35% = $157,500. Therefore, North's total income tax expense reported on its financial statements for 2010 is $192,500 - $157,500 = $35,000.

North,Inc ,Earns Book Net Income Before Tax of $500,000 in 2010.In