Problem:
At the end of its third year of operations, December 31,2005, Delilah Corp. is reporting pre-tax book income of $223,000. The following items are relevant to Delilah's deferred tax computations:
a. A $55,000 unrealized holding gain on its trading securities. This gain is not recognized for tax purposes until the securities are sold.
b. Bad debt expense of $24,000 was recorded on its accounts receivable, although during 2005 no actual write-offs took place.
c. during 2005, Delilah received $19,000 cash from one of its customers. The payment received relates to a product that will be completed and delivered to the customer in late January 2006. Delilah is subject to a 40% corporate tax rate.
Required to do:
1. Determine Delilah Corp.'s taxable income and taxes payable for 2005.
2. Determine the changes in Delilah Corp's deferred tax amounts for 2005.
3. Calculate tax expense for Delilah Corp. for 2005.