Information for questions 8. and 9. Paige Company deducts insurance expense of $
ID: 2527663 • Letter: I
Question
Information for questions 8. and 9. Paige Company deducts insurance expense of $105,000 for tax
purposes in 2018, but the expense is not yet recognized for accounting purposes. In 2019,
2020, and 2021, no insurance expense will be deducted for tax purposes, but $35,000 of
insurance expense will be reported for accounting purposes in each of these years. Paige
Company has a tax rate of 40% and income taxes payable of $90,000 at the end of 2018.
There were no deferred taxes at the beginning of 2018.
8. What is the amount of the deferred tax liability at the end of 2018?
a. $42,000
b. $36,000
c. $15,000
d. $0
9. What is the amount of income tax expense for 2018?
a. $132,000
b. $126,000
c. $105,000
d. $90,000
Explanation / Answer
8. The amount of the deferred tax liability at the end of 2018:
105000*0.4 = 42000
Answer - a. $42,000
9. The amount of income tax expense for 2018:
42000 + 90000 = $132,000
Answer - a. $132,000