Poole & Co. had a temporary difference of $45 million resulting in a deferred tax liability of$15 million. What is the impact on income tax expense and net income?O income tax expense increases and net income decreasesO income tax expense increases and net income increasesO Income tax expense decreases and net income decreasesO income tax expense decreases and net income decreases

Temporary Difference: When an asset or liability's carrying amount in the financial statements…

Answered: Poole & Co. had a temporary difference…

Poole & Co. had a temporary difference of $45 million resulting in a deferred tax liability of $15 million. What is the impact on income tax expense and net income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Poole & Co. had a temporary difference of $45 million resulting in a deferred tax liability of
$15 million. What is the impact on income tax expense and net income?
O income tax expense increases and net income decreases
O income tax expense increases and net income increases
O Income tax expense decreases and net income decreases
O income tax expense decreases and net income decreases

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