Question

Tamar Precast, a Zebulon -based producer of steam-cured architectural quoins, reports the following for its fye 12/31/18 (all amounts in 000), which had Taxable Income of $900,000. a) Tax payable relating to 2018 was $270. b) The only book-tax differences were $26 of traffic fines, $40 of warranty accruals and an excess of tax-over-book depreciation of $120. c) The enacted tax rate for 2019 was 32%. Required: Provide the 2018 income statement from PTNI through to NI.

Answer 1

Calculating Pre tax net income from taxable income:

Taxable Income	$900,000
Less: Traffic Fines not deductible under tax	($26,000)
Less: Warranty accruals	($40,000)
Add: Excess of tax over book depreciation	$120,000
Pre tax Net Income	$954,000

Calculation of Deferred Tax

Total temporary timing deference = $120,000 - $40,000 = $80,000

Deferred Tax Expense = 80,000 * 32% = $25,600

Income Statement for 2018

Pre tax Net Income	$954,000
Less: Tax expense
Current Tax Expense	($270,000)
Deferred Tax Expense	($25,600)
Net Income	$658,400

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