Question: An entity has no permanent differences or state income taxes. The federal tax rate in 20x4 and all prior years was 40%. In early 20x5,
An entity has no permanent differences or state income taxes. The federal tax rate in 20x4 and all prior years was 40%. In early 20x5, Congress enacted a new tax rate of 50% for 20x5 and all future years. At Dec 31, 20x4, the entity had a cumulative temporary difference of 10,000 related to depreciation, resulting in a deferred tax liability of $4000 at Dec 31, 20x4. The cumulative temporary difference at Dec 31, 20x5, remained unchanged at $4000. Taxable income for 20x5 is $20,000. What is the total income tax expense (current and deferred) for 20x5?
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