Basics of income tax expense

Reference no: EM13127273

White Industries started their operations on January 1, year 1 and recorded $400,000 in warranty expense during the year. Warranty expense was the only difference between the company's pretax financial income and its tax return income of $900,000. White will be required to pay these warranties at a rate of $100,000 per year beginning in year 2. Although White fully expects to earn in excess of $100,000 in year 2 and year 3, the company believes it is more likely than not that it will incur a loss after year 3. The enacted tax rate is 25% in current and future periods. What will White record as it's income tax expense in year 1?

a) $100,000

b) $125,000

c) $175,000

d) $225,000

Reference no: EM13127273

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