A company's income statement reported net income of $80,000 during 2019.The income tax return excluded a revenue item of $6,000 (reported on the income statement)because under the tax laws the $6,000 would not be reported for tax purposes until 2020.Which of the following statements is incorrect assuming a 21% tax rate?
A)Income tax expense on the income statement exceeds the tax liability to the IRS.
B)The $6,000 of revenue creates a deferred tax liability.
C)A $1,260 deferred tax liability is reported as of December 31,2019.
D)Income tax expense on the income statement is $15,540.

Question

Quizplus · Accepted Answer

The incorrect statement is D because the income tax expense on the income statement would be calculated on the $80,000 net income, not accounting for the $6,000 difference due to tax reporting timing. With a 21% tax rate, the income tax expense would be $80,000 * 21% = $16,800, not $15,540.

A Company's Income Statement Reported Net Income of $80,000 During