Question

In its annual income statement, Fox Co. reported income before income taxes of $300,000. Fox estimated that, because of permanent differences, taxable income would be $280,000, and during the year Fox made estimated tax payments of $50,000, which were debited to income tax expense. Fox is subject to a 30% tax rate. What amount should Fox report as income tax expense?

Answer 1

Answer:

In total 84,000 income tax will be reported.

Explanation:

taxable income 280,000

tax rate: 30%

tax expense: taxable income  x tax rate:

                           280,000       x    30%     =     84,000

The company already expected 50,000 tax income:

income tax expense 50,000 debit

             cash                           50,000 credit

So it will adjust for the difference: 84,000 - 50,000 = 34,000

income tax expense 34,000 debit

            income tax payable      34,000 credit

In total 84,000 income tax will be reported.