Question

Mozart Inc.’s $98,000 taxable income for 2014 will be taxed at the 40% corporate tax rate. For tax purposes, its depreciation expense exceeded the depreciation used for financial reporting purposes by $27,000. Mozart has $45,000 of purchased goodwill on its books; during 2014, the company determined that the goodwill had suffered a $3,000 impairment of value for financial reporting purposes. None of the goodwill impairment is deductible for tax purposes.
Mozart purchased a three-year corporate liability insurance policy on July 1, 2014, for $36,000 cash. The entire premium was deducted for tax purposes in 2014.

Required:
1. Determine Mozart’s pre-tax book income for 2014.
2. Determine the changes in Mozart’s deferred tax amounts for 2014.
3. Calculate tax expense for Mozart Inc. for 2014.



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  • CreatedSeptember 10, 2014
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