INCOME TAXES AND CORRECTION OF AN ERROR (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of reconciliation of income tax

The following table shows a reconciliation of income tax expense between the amount reported and the amount under the statutory tax rates in effect for the nine months ended September 30, 2018 and 2017, respectively:

	September 30, 2018			September 30, 2017 (as amended)
Income tax expense from statutory rate	$	549,000		$	205,000
Effect of change in tax status		—			107,100
Other items		(6,112	)		(8,300	)
Effect of permanent timing differences		4,000			57,600

Income tax expense, as reported	$	546,888		$	361,400

Schedule of significant components of the provision for income taxes

The following table presents the significant components of the provision for income taxes:

	September 30, 2018		September 30, 2017 (as amended)
Current
Federal	$	51,400	$	35,400
State		17,900		7,500
Total current provision	$	69,300	$	42,900

Deferred
Federal	$	352,388	$	236,000
State		125,200		82,500
Total deferred provision	$	477,588	$	318,500

Income tax expense	$	546,888	$	361,400

Schedule of deferred income tax assets and liabilities

Deferred income taxes are recorded based upon temporary differences between the financial statement and tax bases of assets and liabilities and available net operating loss and tax credit carryforwards. Temporary differences and carryforwards that comprised deferred income tax assets and liabilities were as follows:

	September 30, 2018			September 30, 2017 (as amended)
Deferred income tax assets
Investments	$	(51,900	)	$	(51,900	)

Deferred income tax liabilities
Depreciation		286,600			287,200
Cash basis timing adjustment		647,700			83,200
		934,400			370,400

Net deferred income tax liability	$	882,400		$	318,500

Schedule of correction of an error of deferred income tax assets and liabilities

In the period ended September 30, 2017, the Company did not properly record its expected current and deferred income tax liabilities for its expected income tax expense. The table below shows the correction of this error:

	As originally Presented			Correction			As Amended

Current income taxes payable	$	0		$	42,900		$	42,900
Total current liabilities	$	1,097,475		$	42,900		$	1,140,375

Deferred income taxes payable	$	0		$	318,500		$	318,500
Total liabilities	$	1,619,129		$	318,500		$	1,937,629

Retained earnings (Accumulated Deficit)	$	(71,209	)	$	(361,400	)	$	(432,609	)
Total liabilities and stockholders’ equity	$	1,683,038		$	—		$	1,683,038

	As originally Presented		Correction			As Amended

Income tax expense	$	0	$	361,400		$	361,400
Net Income	$	512,435	$	(361,400	)	$	151,035

Earnings per share	$	0.02	$	(0.01	)	$	0.01

PowerComm Holdings Inc. 10-Q