How Much Tax Expense Would Be Recorded Under the Accrual

question 27

Multiple Choice

How much tax expense would be recorded under the accrual method for F2014? $$\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\\hline \text { Deferred tax liability } & 30,000 & & \\\hline \text { Revenue } & & 130,000 & 150,000 \\\hline \text { Taxable income } & & 95,000 & 105,000 \\\hline \text { Tax rate } & 30 \% & 25 \% & 35 \% \\\hline\end{array}$$

• A)5,000
• B)27,500
• C)32,500
• D)37,500

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Definitions:

Internal Rate of Return

This is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Payback Period

The length of time it takes for an investment to recover its initial expenditure from the cash inflows that it generates.

After-Tax Discount Rate

The rate used to discount future cash flows to their present value, adjusted for the impact of taxes.

Income Tax Rate

The percentage of taxable income that individuals or corporations are required to pay to the government.