Tax Expense, Tax Payable, and Deferred Tax Liability:
Changing Tax Rate
During 2000, Wilbur Mills, Inc., recognized an additional $12 million of depreciation expense on its income statement and reported $16 million as depreciation on its tax return. During 2000, the statutory income tax rate was reduced from 40 to 35%, effective at the beginning of 2000. Pre tax income was $14 million.
Required
Determine the following amounts for 2000:
a. Income tax expense.
b. Income tax payable.
c. Difference between the book and tax bases of Wilbur Mills’ assets at year end.
d. Deferred tax liability at year end.
e. Percentage relationship between pre tax income and income tax expense reported in the income statement.