Withering Inc The Statutory Income Tax Rate Remained at 45% Throughout the Its

question 62

Essay

Withering Inc.began operations in 2011.Due to the untimely death of its founder,Edwin Delaney,the company was wound up in 2013.The following table provides information on Withering's income over the three years.
$$\begin{array} { | l | l | l | l | } \hline & 2011 & 2012 & 2013 \\\hline \text { Income before tax } & 5,000 & 95,000 & 87,000 \\\hline \text { Taxable income } & \text { nil } & 90,000 & 97,000 \\\hline\end{array}$$ The statutory income tax rate remained at 45% throughout the three years.
Requirement:
a.For each year and for the three years combined,compute the following:
- income tax expense under the taxes payable method;
- the effective tax rate (= tax expense -;- pre-tax income)under the taxes payable method;
- income tax expense under the accrual method;
- effective tax rate under the accrual method.
b.Briefly comment on any differences between the effective tax rates and the statutory rate of 45%.

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