Pharoah Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $960000
Estimated litigation expense 2600000
Installment sales (2080000)
Taxable income $1480000

The estimated litigation expense of $2600000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1040000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1040000 current and $1040000 noncurrent. The income tax rate is 20% for all years. The income tax expense is:

Income tax expenses $192,000

Explanation:

TD or PD Future taxable Tax Rate

(Deductible)

Litigation $2,600,000 20%

Installment ($2,080,000) 20%

Deferred Tax

Asset Liability

($520,000) $416,000

Income Tax expenses =$960,000 × 20%

=$ 192,000

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"