Phyllis, Inc

question 94

Multiple Choice

Phyllis, Inc., earns book net income before tax of $600,000. Phyllis puts into service a depreciable asset this year, and its 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 21%, what is Phyllis's total income tax expense reported on its GAAP financial statements?

• A) $151,200
• B) $126,000
• C) $100,800
• D) $25,200

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered, which should not influence future business decisions.

Period Cost

Expenses that are not directly tied to the production process and are charged to the period in which they are incurred.

Future Decisions

Decisions that will be made in the future, often based on forecasts or projections.

Variable Cost Method

A pricing strategy that only accounts for direct materials, direct labor, and variable manufacturing overhead costs, excluding any fixed costs from its calculations.