# Tax expense question

• Taxable income = \$100,000.
• Pretax income = \$120,000.
• Current tax rate = 20%.
• Tax rate when the reversal occurs will be 10%.

what is the company’s tax expense?

Deferred tax liability = (120,000 − 100,000) × 0.1 = 2,000

Tax expense = current tax rate × taxable income + deferred tax liability

0.2 × 100,000 + 2,000 = 22,000

Why wouldn’t you just calculate for tax expense: pretax inc * 20% as it is calculated in the next question?

An analyst has gathered the following tax information:

Year 1 Year 2 Pretax Income \$60,000 \$60,000 Taxable Income \$50,000 \$65,000

The current tax rate is 40%. Assume the tax rate is reduced to 30% and the change is enacted at the beginning of Year 2.

In year 1, what are the taxes payable and what is the deferred tax liability (DTL)?

tax expense is pretax * tax = (60000*0.40) = 20 000

DTL is (60000 - 50000) * 0.3 = 3000

similar questions but maybe you need to re-read

In the second questions it is breaking out Tax Expense and DTL

To get Taxes Payable you need = Tax Expense + ChangeinDTL - ChangeinDTA

Second question lists tax expense at 20000 and DTL at 3,000…taxes payable would be 23000 in this case in the second question