What effect (if any) would the unrealized profits in beginning inventory have on income tax expense for 2018?

Question

Quizplus · Accepted Answer

Unrealized profits in beginning inventory are included in taxable income and are subject to income tax. The unrealized profits in beginning inventory of $12,000 would increase taxable income by $12,000 and, if the income tax rate is 10.33%, income tax expense would increase by $1,240 (=$12,000 x 10.33%). Therefore, the correct answer is choice D.

What Effect (If Any) Would the Unrealized Profits in Beginning