The enacted tax rate is 25 in current and future periods., Ask an Expert

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White Industries started their operations on January 1, Year 1 and recorded $400,000 in warranty expense during the year. Warranty expense was the only difference between the company's pretax financial income and its tax return income of $900,000. White will be required to pay these warranties at a rate of $100,000 per year beginning in Year 2. Although White fully expects to earn in excess of $100,000 in Year 2 and Year 3, the company believes it is more likely than not that it will incur a loss after Year 3. The enacted tax rate is 25% in current and future periods. What will White record as its income tax expense in Year 1?

A. $100,000

B. $125,000

C. $175,000

D. $225,000

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9407201

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