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Homework answers / question archive / Copper Metals Company reported pre-tax accounting income of $ 300,000 for fiscal year ended December 31, 2020
Copper Metals Company reported pre-tax accounting income of $ 300,000 for fiscal year ended December 31, 2020. As well, the following information was reported:
Life insurance proceeds on the death of the CEO $ 130,000
CCA in excess of depreciation 20,000
Instalment tax payments made during 2020 25,000
Enacted income tax rate for 2020 30%
What amount should Copper Metals report as its current income tax liability on its December 31, 2020 SFP?
| 1. |
$ 26,000 |
|
| 2. |
$ 20,000 |
|
| 3. |
$ 51,000 |
|
| 4. |
$ 45,000 |
Answer
Income tax liability is the amount that an individual or an entity has to pay to the taxing authorities,since its to be paid its classified as income tax libility.
Income tax liability = taxable income - tax dedctions - tax credits
here we have a pre tax income of $300000
From this we need to reduce
(1). Life insurance proceeds from death of CEO
(2). CAA in excess of depreciation.
= $300000 - 130000 - 20000 = 150000
$150000 * enacted tax rate = tax liability
150000*30% = $45000
From the 45000 to be paid we have paid tax intallment in the year of $25000 we need to deduct that to arrive at the income tax liability
Therefore 45000 - 25000 = $20000
Income tax liability = $20000
