At the End of 2017, Its First Year of Operations

question 48

Multiple Choice

At the end of 2017, its first year of operations, Halifax Corp. prepared the following reconciliation between pre-tax accounting income and taxable income: The estimated lawsuit expense of $400,000 will be deductible in 2018 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $300,000 in each of the next three years. The income tax rate is 25% for all years. Halifax adheres to IFRS requirements. The deferred tax liability to be recorded is

• A)$225,000.
• B)$200,000.
• C)$100,000.
• D)$ 0.

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Definitions:

Direct Labor-Hours

The total hours of labor directly involved in the production of goods.

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to specific products or services based on the activities that contribute to these costs.

Overhead

The indirect costs of running a business that cannot be directly linked to a specific product or service, such as utilities, rent, and administrative expenses.

Activity Rate

The predetermined overhead rate used in activity-based costing to assign overhead costs to products or services based on a specific activity.