South, Inc

question 17

Multiple Choice

South, Inc., earns book net income before tax of $400,000 in year 1. South acquires a depreciable asset in year 1, and first year tax depreciation exceeds book depreciation by $50,000. At the end of year 1, South's deferred tax liability account balance is $17,500. In year 2, South earns $500,000 book net income before tax, and its book depreciation exceeds tax depreciation by $20,000. South records no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is South's total provision for income tax expense reported on its GAAP financial statements for year 2?

• A)$7,000
• B)$168,000
• C)$175,000
• D)$182,000

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