Items 1 and 2 are based on the following:
Zeff Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, 2006, its first year of operations:
|
Pretax financial income |
$160,000 |
|
Nontaxable interest received on municipal securities |
(5,000) |
|
Long-term loss accrual in excess of deductible amount |
10,000 |
|
Depreciation in excess of financial statement amount |
(25,000) |
|
Taxable income |
$140,000 |
Zeff’s tax rate for 2006 is 40%.
In its 2006 income statement, what amount should Zeff report as income tax expense—current portion?
- $52,000
- $56,000
- $62,000
- $64,000
In its December 31, 2006 balance sheet, what should Zeff report as deferred income tax liability?
- $2,000
- $4,000
- $6,000
- $8,000