Mathis Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax
Question:
Mathis Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $ 1,200,000
Estimated litigation expense 3,000,000
Installment sales (2,400,000)
Taxable income $ 1,800,000
The estimated litigation expense of $3,000,000 will be deductible in 2019 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1,200,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1,200,000 current and $1,200,000 noncurrent. The income tax rate is 30% for all years.
The income tax expense is
A | $360,000 |
B | $540,000 |
C | $600,000 |
D | $1,200,000 |
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones