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Assume that an entity’s California tax after prior year provision to return true-ups is $500,000. If...

Assume that an entity’s California tax after prior year provision to return true-ups is $500,000. If the California regular tax is $1,000,000 and its income tax expense is $125,000, then which of the following identifies the total current state tax expense?

A.   $375,000
B.   $625,000
C.   $1,000,000
D.   $1,125,000

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Answer #1

Ans:

As per income tax rules :

Total current state tax expense will be calculated as follows;

Regular tax : $1,000,000

Income Tax expense : $125,000

Prior year provision to return true-ups : $500,000

So total current state tax expense will be : Regular tax + Income Tax expense - Prior year provisions:

= $1,000,000 + $125,000 - $500,000 = $625,000

So correct answer is option B.

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