Compute Income tax expense reported by Ohio

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Question - Ohio Corp. reported a deferred tax liability of $6,000,000 for the year ended December 31, 2020, when the tax rate was 40%. The deferred tax liability was related to a temporary difference of $15,000,000 caused by an installment sale in 2020. The temporary difference is expected to reverse in years 2021 through 2023 as $5,000,000 of installment income is expected to be recognized as taxable income in each of those years.

There are no other temporary differences. A new tax law was passed in 2021 with the tax rate remaining 40% through December 31, 2021, then increase to 45% for tax years beginning after December 31, 2021. Taxable income for the year 2021 is $30,000,000. Compute Income tax expense reported by Ohio on its year end December 31, 2021 income statement?

A) $12,000,000

B) $10,500,000

C) $10,000,000

D) $11,250,000

Reference no: EM132514067

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