Sorbon Corporation pays federal income tax at a 34 percent rate. In year 1, Sorbon deducts $80,000 as bad debt expense in computing its book income but deducts only $70,000 for bad debt expense on its tax return.
a. What is the difference between Sorbon’s book tax expense and its federal tax liability?
b. How does Sorbon account for this difference on its financial statements?
c. In year 2, Sorbon reports $50,000 for bad debt expense on its books and $60,000 bad debt expense in computing taxable income. How does Sorbon account for this difference on its financial statements?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here