Income tax expense reported on the income statement is $45,000 for 20A,and the tax return for 20A (the first year)shows an income tax liability of $42,000 because of a deduction that cannot be taken until 20B.The future income tax amount on the statement of financial position at the end of 20A will be which of the following?

Question

Quizplus · Accepted Answer

The income tax liability is lower on the tax return than what was reported on the income statement, which means that the company will receive a tax benefit in the future. Therefore, the future income tax amount should be a credit. The credit should be for the difference between the tax expense reported on the income statement ($45,000) and the tax liability on the tax return ($42,000), which is $3,000. Hence, the correct answer is B.

Income Tax Expense Reported on the Income Statement Is $45,000