Question

Roth Inc. has a deferred tax liability of \(68,000 at the beginning of 2018. At the end of 2018, it reports accounts receivable on the books at \)90,000 and the tax basis at zero (its only temporary difference). If the enacted tax rate is 34% for all periods, and income taxes payable for the period is $230,000, determine the amount of total income tax expense to report for 2018.

Short answer

Accounts receivables is an item that is listed on the assets side of the organization's balance sheet. It depicts the amount owned by the organizations from its debtors.

Step-by-step solution

Computation of deferred tax asset/liability at the end of 2018

Particulars	Amount
Book basis of asset	$90,000
Multiply: Tax rate	34%
Deferred tax liability at the end	$30,600

Calculation of total income tax expense for the year 2018.

Particulars	Amount
Deferred tax liability at the end	$30,600
Add: Deferred tax liability at the beginning	$68,000
Deferred tax benefit	($37,400)
Add: Income tax payable	$230,000
Income tax expense	$192,600