Information for Hobson Corp. for the current year ($ in millions): How much tax
ID: 2422094 • Letter: I
Question
Information for Hobson Corp. for the current year ($ in millions):
How much tax expense on income from continuing operations would be reported in Hobson's income statement?
$56 million.
$60 million.
$62 million.
$50 million.
Income from continuing operations before tax $150 Loss on discontinued operation (pretax) 30 Temporary differences (all related to operating income): Accrued warranty expense in excess of expenseincluded in operating income
10 Depreciation deducted on tax return in excess of
depreciation expense
25 Permanent differences (all related to operating income): Nondeductible portion of entertainment expense 5 The applicable enacted tax rate for all periods is 40%.
Explanation / Answer
The tax expense will be reported as follows:
Tax payable:(150-10-25+5)*40%=48 million
Deferred tax: 35*40%=14 million
Total tax expense from continuing operations: 62 million