Accounting for income taxes

Accounting for income taxes

Introduction

Whitley corporation plans to strategize its expansion initiatives. The year 2010 has witnessed a decrease in sales due to recession. Hence, in order to cope with the present situation, its management is considering purchase of equipment. This would affect the earnings of the company if the purchase is to take place in the last quarter of the year. Therefore, an analysis has been conducted to determine the timing of the purchase.

Answer Part A)

Calculation of income tax expense if the equipment is purchased next year

50000*0.40=$20,000

Answer Part B)

Income tax expense=Taxes payable-Deferred Tax Asset+Deferred Tax Liability

Income tax ...