For its first year of operations Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Tringali's tax rate is 40%.
What should Tringali report as its income tax expense for its first year of operations?

Question

Quizplus · Accepted Answer

To calculate the income tax expense, we need to calculate the taxable income first.
Accounting income before taxes: $300,000
Adjustments:
Depreciation: $30,000
Meals and entertainment: $7,000
Taxable income: ($300,000 - $30,000 - $7,000) = $263,000
Now we can calculate the income tax expense: 
Income tax expense = Taxable income x Tax rate
Income tax expense = $263,000 x 40% = $105,200
Rounded to the nearest thousand, the income tax expense is $114,000 (option B).

For Its First Year of Operations Tringali Corporation's Reconciliation of Pretax