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What is the total income tax expense to be reported

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Reference no: EM132693862

At the end of 2020, its first year of operations, Chestnut Corp. reported the following:

Pre-tax accounting income $ 300,000

Estimated lawsuit expense 750,000

Prepaid Expense 200,000

  • The estimated lawsuit expense of $ 750,000 will be deductible in 2022 when it is expected to be paid. The Prepaid expenses were paid on December 31, 2020 and no portion was expensed in the 2020 year. They will be expensed for accounting purposes equally over the next 2 years but are deductible for tax purposes in the year of payment.
  • The income tax rate is 25% for all years.

Required:

Problem 1: What is the total income tax expense to be reported on the income statement?

Reference no: EM132693862

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