Use the information below to answer 1 and 2 Brine Inc. reported $500,000 pretax

Question

Use the information below to answer 1 and 2

Brine Inc. reported $500,000 pretax accounting income for 2018, its first year of operations. Included in the income statement was an installment sale of property in the amount of $80,000. However, for tax purposes, Brine Inc reported the income in the year the cash was collected. Cash collected on the installment sale was $50,000 in 2019 and $30,000 in 2020. In 2018, Brine, Inc also had $20,000 in cash proceeds from an executive’s life insurance contract. The income tax rate is 35%.

1. What is the income tax expense in the 2018 income statement?

            a. $180,000

            b. $161,000

            c. $168,000

            d. $140,000

2. Assume pretax accounting income is $610,000 in 2019. What is the tax expense for 2019?

            a. $213,500

            b. $241,500

            c. $248,500

            d. $231,000

Explanation / Answer

d.$140,000.

the following is the calculation:

2.d.231,000.

pretax acccounting income 500,000 less:sale value of equipment (80,000) less:cash proceeds from life insurance (not taxable) (20,000) taxable income 400,000 tax @35% 140,000

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