APB #11

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• The following is an Illustration of the weaknesses of APB #11.

  • To calculate the tax payable from taxable income and the tax expense from book income is intuitively appealing.
  • If there are differences that give rise to deferred taxes, however, there can be problems.

Information for illustration:

• John’s Pajama’s, Inc., has pre-tax accounting (book) income of $30,000 in year 1, the current year, its first year of operations.
• The following differences between book income and income on the return (taxable income) exist for the current year:

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