Answer:
Assuming a tax rate of 30%, what will be Alvis’s net income?
100-0.30=0.70
360,000 x 0.70 = $252,000.
What will Alvis report in the balance sheet pertaining to income taxes?
Income tax = 360,000 x 0.30 = $ 108,000
Taxable income is only $220,000
Deferred tax liability ([$360,000 – 220,000] × 30%) = 42,000
Account Title Dr Cr
Income tax expense 108,000
Deferred tax liability 42,000
Income tax payable ($220,000 × 30%) 66,000
