At the End of 2020, Its First Year of Operations

question 12

Multiple Choice

At the end of 2020, its first year of operations, Ontario Corp. prepared the following reconciliation between pre-tax accounting income and taxable income: $$\begin{array} { l r } \text { Pre-tax account ing income } & \$ 300,000 \\\text { Estimated lawsuit expense } & 750,000 \\\text { Instalment sales } & ( 600,000 ) \\\text { Taxable income } & \$ 450,000\end{array}$$ The estimated lawsuit expense of $ 750,000 will be deductible in 2022 when it is expected to be paid. The instalment sales will be realized at $ 300,000 in each of the next two years. The income tax rate is 30% for all years. The total income tax expense to be reported on the income statement is

• A) $ 90,000.
• B) $ 135,000.
• C) $ 150,000.
• D) $ 300,000.

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Definitions:

Divorced Parents

Individuals who have legally ended their marriage and are no longer living together as spouses, often involving arrangements for co-parenting if children are involved.

Cohabitation

The living arrangement in which an unmarried couple resides together in a long-term relationship that resembles a marriage.

Custody

The physical and legal responsibility of caring for children; assigned by a court for divorced or unmarried parents.

Instrumental Tasks

The practical physical tasks necessary to maintain family life.