By NEAS - 8/1/2018 8:46:30 PM
FA Module 13 Tax expense with deferred taxes practice exam questions
(The attached PDF file has better formatting.)
A firm pays income taxes of 99 in 20X1 and of 80 in 20X2. The corporate tax rate is 20%.
The firm reports deferred tax assets and liabilities for December 31, 20X1, and December 31, 20X2, as:
Deferred taxes at December 31, 20X1 December 31, 20X2
Current tax asset 15 26
Current tax liability 42 39
Deferred tax asset 57 64
Deferred tax liability 85 75
Question 13.1: Tax expense
What is the firm’s tax expense in 20X2?
Answer 13.1: 80 – (26 – 15) + (39 – 42) – (64 – 57) + (75 – 85) = 49
Taxes paid
– ΔCurrent tax asset
+ ΔCurrent tax liability
– ΔDeferred tax asset
+ ΔDeferred tax liability
= Tax expense
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