For the current year ($ in millions), Centipede Corp. had $90 in pretax accounti
ID: 2647103 • Letter: F
Question
For the current year ($ in millions), Centipede Corp. had $90 in pretax accounting income. This included warranty expense of $8 and $19 in depreciation expense. 7 million of warranty costs were incurred, and MACRS depreciation amounted to $42. In the absence of other temporary or permanent differences, what was Centipede's income tax payable currently, assuming a tax rate of 40%?
For the current year ($ in millions), Centipede Corp. had $90 in pretax accounting income. This included warranty expense of $8 and $19 in depreciation expense. 7 million of warranty costs were incurred, and MACRS depreciation amounted to $42. In the absence of other temporary or permanent differences, what was Centipede's income tax payable currently, assuming a tax rate of 40%?
Explanation / Answer
Taxable Income = pretax accounting income + warranty expense + depreciation expense - warranty costs were incurred - MACRS depreciation
Taxable Income = 90 + 8 + 19 - 7 - 42
Taxable Income = $ 68
Centipede's income tax payable = Taxable Income*tax rate
Centipede's income tax payable = 68*40%
Centipede's income tax payable = $ 27.20 Million
Answer
c) 27.2 Million