Question

Lee Company’s current income taxes payable related to its taxable income for 2017 is \(320,000. In addition, Lee’s deferred tax liability increased \)40,000 and its deferred tax asset increased $10,000 during 2017. What is Lee’s income tax expense for 2017?

Short answer

An increase or decrease in the amount of organization deferred tax asset or liabilitydirectly affects the total income tax expense of the current year. Either it increases the total tax or decreases the amount.

Step-by-step solution

Given the amounts as

Particulars	Amount
Taxable income	$320,000
Deferred tax liability	$40,000
Deferred tax asset	$10,000

Computation of income tax expense for 2017

$\begin{array}{rcl}\mathrm{Income}\mathrm{tax}\mathrm{expense}& =& \left(\mathrm{Taxable}\mathrm{income}+\mathrm{Deferred}\mathrm{tax}\mathrm{liablity}\right)-\mathrm{Deferred}\mathrm{tax}\mathrm{asset}\\ & =& \left(\$320,000+\$40,000\right)-\$10,000\\ & =& \$360,000-\$10,000\\ & =& \$350,000\end{array}$