Question

Reed Corporation reports 2017 sales of $415 million, income before income taxes of $122. 3 million and tax expense of $35. 9 million.


If sales are projected to increase by 4% next year, projected tax expense for 2018 will be:


A. $35. 9 million


B. $37. 3 million


C. $40. 8 million


D. $42. 3 million


E. There is not enough information to determine the amount

Answer 1

There is not enough information to determine the amount. The tax expense will be a function of forecasted pre-tax income.

What is Tax expense ?

• Tax costs are all of the taxes that a person, business, or other entity owes to the government. Taxable income is multiplied by the effective tax rate to calculate income tax expense. Other taxes, like inheritance or property taxes, may be assessed against the value of an item.
• In journal entries, businesses deduct income tax expense and credit income tax payable. The completed journal entries include an equal debit and credit to income tax expense and income tax payable, respectively, if businesses use the same cash method of accounting for both financial and tax reporting.
• Because paying taxes results in a cash outflow, income tax is regarded as an expense for both businesses and individuals. The company or person is required to pay income tax on the income once the taxable income has been determined.

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