Question

Wayne Co. had a decrease in deferred tax liability of $20 million, a decrease in deferred tax assets of $10 million, and an increase in tax payable of $100 million. The company is subject to a tax rate of 40%. The total income tax expense for the year was: Multiple Choice $90 million. $100 million. $110 million. $130 million.

Answer 1

Answer:

$90 million

Explanation:

The differed tax liability is when a company has delayed paying their taxes and they owe the state taxes so they become liable to pay a certain amount so when we record this  on the statement of profit or loss is that if the differed tax liability decreases then it will decrease the tax expense as it was owed and if the tax liability increases therefore if will increase the tax expense. so in this case the tax expense will decrease by $20 million.

Then we have a decrease in differed tax assets which means that tax was overpaid and now it is decreasing therefore we would see the tax expense increasing by $10 million as the tax for $10 million has been paid out for the period. Then tax payable is the amount of tax that is to be paid of $100 million which will cater for tax in the company's financial period so the calculation for tax expanse is:

Tax expense= -20 million+10 million +100 million

                    = $90 million.

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