Question

The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars): Pretax accounting income: $ 559 Pretax accounting income included: Overweight fines (not deductible for tax purposes) 5 Depreciation expense 105 Depreciation in the tax return 285 The applicable tax rate is 25%. There are no other temporary or permanent differences. Franklin's balance sheet at the end of its first year would report:

Answer 1

Particulars	Amount
Pretax accounting income	$559
permanent difference item:
Add: Overweight fines	$5
Temporary difference item:
Less: Understated Depreciation (285 - 105)	-$180
Taxable income	$384
Income tax (384*25%)	$96
Less: Income tax expense as per books (559+5)*25%	$141
Deferred Tax liability among non - current liabilities	$45