Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 35% corporate tax rate and no valuation allowance.
Assets Cash Accounts Receivable Buildings Acc. Depreciation Furniture & Fixtures Acc. Depreciation Total Assets Liabilities Accrued Litigation Expense Note Payable Total Liabilities Stockholders’ Equity Paid in Capital Retained Earnings Total Liabilities and Stockholders’ Equity Tax Debit/(Credit) $3005,000300,000(150,000)40,000(21,000)$174,300$−0−(116,000)($116,000)($1,000)(57,300)($174,300) Book Debit/(Credit) $3005,000300,000(80,000)40,000(15,000)$250,300($27,000)(116,000)($143,000)($1,000)(106,300)($250,300)
Black, Inc.’s, gross deferred tax assets and liabilities at the beginning of Black’s year are listed below.
Accrued Litigation Expense Subtotal Applicable Tax Rate Gross Deferred Tax Asset Building - Acc. Depreciation Furniture & fixtures - Acc. Depreciation Subtotal Applicable tax rate Gross deferred tax liability Beginning of Year $20,000$20,000×35%$7,000($61,000)(3,000)($64,000)×35%($22,400)
Black, Inc.'s, book income before tax is $6,000.Black records two permanent book-tax differences.It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals and entertainment expense.Calculate Black's current tax expense.
Definitions:
Sales Contract
A legal agreement between a buyer and seller outlining the terms of a sale of goods or services.
Insure
To provide or obtain insurance coverage against risk or loss.
Rights
Entitlements or freedoms granted to individuals or groups by law, social convention, or moral principles.
Liabilities
Financial obligations or debts that a company or individual owes to others.