[APPENDIX] For 2012,Wasabi Company has accounting revenues of $6,000.However,because of temporary differences between tax and accounting,$1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting,and the tax rate is 40%,what is the amount of tax payable to the IRS?

Question

Quizplus · Accepted Answer

To find the amount of tax payable to the IRS, we need to first calculate the taxable income, which is the accounting revenue minus the expenses.

Taxable Income = Accounting Revenue - Expenses

Taxable Income = $6,000 - $3,000

Taxable Income = $3,000

Since there are temporary differences between tax and accounting, only $5,000 of the accounting revenue is subject to tax.

Taxable Income for Tax Purposes = Accounting Revenue - Temporary Differences - Expenses

Taxable Income for Tax Purposes = $6,000 - $1,000 - $3,000

Taxable Income for Tax Purposes = $2,000

Now we can calculate the amount of tax payable to the IRS using the tax rate of 40%.

Tax Payable = Taxable Income for Tax Purposes x Tax Rate

Tax Payable = $2,000 x 0.4

Tax Payable = $800

Therefore, the answer is B) $800.

[APPENDIX] for 2012,Wasabi Company Has Accounting Revenues of $6,000