Question

The following information relates to Mountain Transportation for its first year of operations (data in millions of dollars): Pretax accounting income: $ 300 Pretax accounting income included: Overweight fines (not deductible for tax purposes) 8 Depreciation expense 80 Depreciation in the tax return using MACRS: 160 The applicable tax rate is 40%. There are no other temporary or permanent differences. Mountain's net income ($ in millions) is:

Answer 1

Answer:

the net income is $176.80 millions

Explanation:

The computation of the net income is shown below"

Pre tax accounting income $300

Less: income tax expense

tax payable (($300 + $8 - $80) × 40%)  -$91.2

Deferred tax liability ($80 × 0.40) -$32

net income $176.80

Hence, the net income is $176.80 millions

We simply deduct the income tax expense from the pre tax accounting income so that the net income could come