A company's 2016 income tax return reported a $75,000 tax liability. During 2016, the deferred income tax liability account increased $9,000. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Deferred tax liability account increased by $9,000, meaning that $9,000 of income was recognized for tax purposes during 2016 but not yet recognized for financial accounting purposes. Therefore, the income tax expense reported on the 2016 income statement would be computed as follows: 
Income Tax Expense = Current tax liability + Change in deferred tax liability
Income Tax Expense = $75,000 + $9,000
Income Tax Expense = $84,000

A Company's 2016 Income Tax Return Reported a $75,000 Tax