Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,
ID: 2337576 • Letter: M
Question
Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,000 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. In 2019, Mini records $800,000 of pretax book net income. Mini did not deduct any bad debt expense for book purposes in 2019 but did deduct $15,000 in bad debt expense for tax purposes. Mini records no other temporary or permanent differences. Assuming that the pertinent U.S. tax rate is 21%. For 2019, compute Mini's total income tax expense, current income tax expense, and deferred income tax expense.
a. Current income tax expense $
b. Deferred income tax benefit $
c. Total income tax expense $
Explanation / Answer
As provisions of bad debts creates "timing difference" between Taxable income and Income as per Accounts.
Current income tax expense for 2019 = $8,00,000 * 21% = $1,68,000
Deferred income tax benefit for 2019 = $20000 - $15000 = $5000 *21% = $1050
Total income tax expense for 2019 = $166950($168000 - $1050)