Question

At the beginning of 2022, KPD Inc has depreciable assets with a financial accounting book value of $100 million and a tax basis of $80 million. At the end of 2022, KPD’s depreciable assets have a financial accounting book value of $90 million and a tax basis of $74 million. KPD calculated tax payable of $10 million for 2022, and its tax rate is 25%. Based on only that information, KPD’s tax expense for 2022 is___________

Answer 1

Answer:

KPD’s tax expense for 2022 is $9 million.

Explanation:

                                                                                                       $ in Millions

Taxable Income                                                (10/25%)              40

Add: Tax basis depreciation                                 (80-74)                6

Accounting Income before Deprecation                                46

Less: Accounting Deprecation                         (100-90)               10

Accounting Income                                                                36

Tax expense                                                          (36x25%)         9