Phyllis, Inc

question 127

Multiple Choice

Phyllis, Inc., earns book net income before tax of $600,000. Phyllis puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Phyllis has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is Phyllis's total income tax expense reported on its GAAP financial statements?

• A)$252,000
• B)$210,000
• C)$168,000
• D)$42,000

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Definitions:

Cash Dividend

A payment made by a corporation to its shareholders, usually in the form of cash, reflecting the company's earnings distribution.

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares, rather than cash.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the net worth of the company to its shareholders.

Stock Split

An action by a company to divide its existing shares into multiple new shares to boost the stock's liquidity, although the overall value of the company remains unchanged.