Eckert Corporation's partial income statement after its first year of operations is as follows:

Income before income taxes $3,750,000
Income tax expense
Current $1,035,000
Deferred 90,000 1,125,000
Net income $2,625,000

Eckert uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $2,400,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

A. $2,700,000

B. $1,125,000

C. $2,400,000

D. $2,100,000

Respuesta :

Answer:

A. $2,700,000

Explanation:

For computing the deduction amount for depreciation tax, first we have to calculate the total amount of deferred tax amount which is shown below:

Total Deferred tax amount = Deferred tax × (percentage value ÷ tax rate)

= $90,000 × (100% ÷ 30%)

= $300,000

And the depreciation expense in this year is $2,400,000

So, the total amount deducted would be

= $300,000 + $2,400,000

= $2,700,000