Questions -

Q1. Mitchell Corporation prepared the following reconciliation for its first year of operations:

Pretax financial income for 2011 $900,000

Tax exempt interest (75,000)

Originating temporary difference (225,000)

Taxable income $600,000

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2011 is 35%.

What amount should be reported in its 2011 income statement as the deferred portion of income tax expense?

$90,000 credit

$105,000 credit

$90,000 debit

$120,000 debit

Q2. Mitchell Corporation prepared the following reconciliation for its first year of operations:

Pretax financial income for 2011 $900,000

Tax exempt interest (75,000)

Originating temporary difference (225,000)

Taxable income $600,000

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2011 is 35%.

In Mitchell's 2011 income statement, what amount should be reported for total income tax expense?

$300,000

$330,000

$315,000

$210,000