Question description
(TCO
B) Hertz Co. prepared the following reconciliation of its pretax
financial statement income to taxable income for the year ended December
31, 2013, its first year of operations:
Pretax financial income $300,000
Nontaxable interest received on municipal securities (15,000)
Estimated warranties not deductible for tax purpose in 2013 35,000
Depreciation in excess of financial statement amount (30 ,000)
Taxable income $290,000
Hertz’s tax rate for Year 2013 and for future years is 40%.
(a) In its Year 1 income statement, what amount should Hertz report as income tax expense-current portion?
(b) In its December 31, 2013 balance sheet, what amount should Hertz report as deferred income tax liability/asset?
