Question

In its first year of operations Acme Corp. had income before tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%. What is the balance in income tax payable at the end of the year?

Answer 1

Answer:

$10,000 (Credit balance)

Explanation:

Given that,

Income before tax = $400,000

Income tax payments during the year = $150,000

Income tax rate = 40 percent

Therefore,

The balance in income  tax payable at the end of the year:

= Tax liability - Income tax paid

= ($400,000 × 40%) - $150,000

= $160,000 - $150,000

= $10,000 (Credit balance)