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What is the amount of the deferred tax liability at the end

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Reference no: EM132913066

Olivia Company deducts insurance expense of 84,000 for tax purposes in 2020, but the expense is not yet recognized for accounting purposes. In 2021, 2022, and 2023, no insurance expense will be deducted for tax purposes, but 28,000 of insurance expense will be reported for accounting purposes in each of these years. Olivia Company has a tax rate of 40% and income taxes payable of 72,000 at the end of 2020. There were no deferred taxes at the beginning of 2020.

Problem 1. What is the amount of the deferred tax liability at the end of 2020?

a. 33,600 b. 28,800 c. 12,000 d. 0

Problem 2. What is the amount of income tax expense for 2020?

a. 105,600 b. 100,800 c. 84,000 d. 72,000

Problem 3. Assuming that income tax payable for 2021 is 96,000, the income tax expense for 2021 would be what amount?

a. 129,600 b. 107,200 c. 96,000 d. 84,800

Reference no: EM132913066

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