Question

Alamo Inc. had $300 million in taxable income for the current year. Alamo also had a decrease in deferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million. The company is subject to a tax rate of 40%. The total income tax expense for the year was:

Multiple Choice

$390 million.

$180 million.

$210 million.

$150 million.

Answer 1

An increase in defered tax liabilities and decrease in deferred tax assets will considered as current year deferred tax expense.

hence current year deferred tax expense of alamo inc. is equal to $90 Million ( decrease of deferred tax aasets $30 million +increase in deferred tax liabilities $60 million).

total tax expense = tax on taxable income + deferred tax expense

total tax expense = $300 million*40% + $90 million

total tax expense = $120 million + $90 miilion = $210 million

therefore Alamo Inc toatl tax expense for the year is $ 210 million