accounting for income taxes 461234

Mathis Co. at the end of 2012, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $600,000

Estimated litigation expense 1,500,000

Installment sales (1,200,000)


Taxable income $900,000

The estimated litigation expense of $1,500,000 will be deductible in 2014 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $600,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $600,000 current and $600,000 noncurrent. The income tax rate is 30% for all years. What is the income tax expense?

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