Information for Hobson International Corp. for the current year ($ in millions):
ID: 2472504 • Letter: I
Question
Information for Hobson International Corp. for the current year ($ in millions):
Income from continuing operations before tax $150
Extraordinary loss (pretax) 30
Temporary differences (all related to operating income):
Accrued warranty expense in excess of write-offs
included in operating income 10
Depreciation deducted on tax return in excess of depreciated expense 25
Permanent differences (all related to operating income):
Nondeductible portion of travel & entertainment expense 5
The applicable enacted tax rate for all periods is 40%.
What is Hobson's income tax payable for the current year?
A. $52 million
B. $50 million
C. $44 million
D. $48 million
Explanation / Answer
Answer:
Income from continuig operations before tax = $150
Less: Extraordinary Loss (pre-tax) = $20
Add: Accrued warranty expense in excess of write-offs = $10
included in operating income.
Add: Non-deductible portion of travel & entertainment expense. = $5
Less: Depreciation deducted on tax return in excess of depreciated expense = $25
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Taxable Income $110
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Therefore Income tax payable for the current year = 110 * 40% = $44 million i.e. C.