Question

TTT Corp. reported pre-tax accounting income of $ 300,000 for 2020. To calculate the income tax liability, the following data were considered:

         Life insurance proceeds on the death of the CEO                          $ 130,000

         CCA in excess of depreciation 20,000

         Instalment tax payments paid to CRA during 2020 25,000

         Enacted income tax rate for 2020                                                                   30%

What amount should Bare Fashion report as its current income tax liability on its December 31, 2020 SFP?

Select one:

a. $ 20,000

b. $ 51,000

c. $ 26,000

d. $ 45,000

Answer 1

Hey there here is the solution,

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.
OPTION A IS THE CORRECT ANSWER

hope this helps.