Question

Alvis Corporation reports pretax accounting income of $480,000, but due to a single temporary difference, taxable income is only $310,000. At the beginning of the year, no temporary differences existed.

Required:

1. Assuming a tax rate of 35%, what will be Alvis's net income?

2. What will Alvis report in the balance sheet pertaining to income taxes?

Net income =_________________________

Balance sheet
Account Reported	Amount

Answer 1

Pretax accounting income	$480,000
Less: Income tax expense
Current	$108,500
Deferred	$59,500
Net Income	$312,000	Answer

Balance Sheet
Account Reported	Amount
Income tax payable	$108,500
Deferred Tax Liability	$59,500

---Workings

A	Taxable Income	$310,000
B	Tax rate	35%
C = A x B	Income tax payable	$108,500
A = 480000 - 310000	Temporary difference	$170,000
B	Tax rate	35%
C = A x B	Deferred Tax Liability	$59,500