Alamo, Inc., had $300 million in taxable income for the current year. Alamo also had a decrease indeferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million. The company issubject to a tax rate of 40%. The total income tax expense for the year wasA. $150 million. B. $180 million. C. $ 390 million. D. $210 million.

Question

Business

Justin Wiggins

3 July, 14:52

Alamo, Inc., had $300 million in taxable income for the current year. Alamo also had a decrease indeferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million. The company issubject to a tax rate of 40%. The total income tax expense for the year wasA. $150 million. B. $180 million. C. $ 390 million. D. $210 million.

+3

Answers (1)

Know the Answer?

Zachery Kidd · Answer 1

D. $210 million

Explanation:

Data given

Decrease in deferred tax assets = $30

Increase in deferred tax liabilities = $60

Taxable income = $300

Tax rate = 40%

The computation of total income tax expense is given below:-

Income tax Payable = $300 * 40%

= $120

Total income tax expenses = Income tax Payable + Decrease in deferred tax assets + Increase in deferred tax liabilities

= $120 + $30 million + $60 million

= $210 million

So, for computing the total income tax expense we simply applied the above formula.