firm acquires an asset for 120k with a 4 yr useful life. Tax reporting done using SL for 3 years. Financial reporting being done using SL for 4 years. Tax rate 40%. Yearly revenue generated by the asset 50k for each year. Income Tax Expense for year 4 a) 6000 b) 8000 c) 12000 d) 20000
both are right. but I thought income tax expense = taxes payable + DTL is that not true?
D?..each year causes a deferred tax liability of 4000 for a total of 12,000. This will all reverse in year 4 and IT = 8000 +12000 = 20000
Holy crap I really need to revise tax!
IT = Taxes payable + (change in DTL) 8000 = 20000 - 12000 (12000 DTL reverses in year 4)