Question

Freda's Florist reported the following before-tax income statement items for the year ended December 31, 2018:Operating income $ 250,000Income on discontinued operations 70,000All income statement items are subject to a 40% income tax rate. In its 2018 income statement, Freda's separately stated income tax expense and total income tax expense would be:(A) $100,000 and $100,000, respectively.
(B) $128,000 and $100,000, respectively.
(C) $128,000 and $128,000, respectively.
(D) $100,000 and $128,000, respectively.

Answer 1

Answer:

Income tax expense

= 40% x $250,000 = $100,000

Total income tax expense

= 40% x ($250,000 +$70,000) = $128,000

The correct answer is D

Explanation:

The income tax expense is calculated on the operating income of $250,000 while the total income tax expense is calculated on the gross income of $320,000. Tax is computed at the rate of 40% of the income respectively.