Answer:
1.
Dr. Income tax Expense $22 million
Cr. Income Tax Payable $16 million
Cr. Deffered tax Liability $6 million
2.
$18 million
Explanation:
1.
Deffer tax liability arises when the book value of the asset is more than the tax basis of the asset. It means there is more depreciation according to tax implication than the depreciation on book value of assets.
Pretax Income = $45 million
Taxable Depreciation = Depreciation as per tax - Accounting depreciation = ($20-$13 )- ($30 - $28 ) = $5 million
Taxable Income = $45 million - $5 million = $40 million
Income tax = 40% x $40 million = $16 million
Deffer tax 2018 = ( $28 million - 13 million ) x 40% = $6 million
Total tax = $16 million + 6 million = $22 million
2.
Pretax Income $45 million
Taxable Depreciation ($5 million)
Taxable Income $40 million
Income tax (16+6) <u>($22 million)</u>
Net Income <u> $18 million</u>
