Question

Problem 17-75 (LO 17-5) The following information applies to the questions displayed below.] Randolph Company reported pretax net income from continuing operations of $851,000 and taxable income of $530,000. The book-tax difference of $321,000 was due to a $289,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $173,000 due to an increase in the reserve for bad debts, and a $205,000 favorable permanent difference from the receipt of life insurance proceeds. Problem 17-75 Part a a. Compute Randolph Company's current income tax expense. Current income tax expense

Answer 1

21% 15.94% 5.0600% 21% 178710 Computation of Current ncome Atx Expense Pre-tax net income $851,000.00 Part-d: Reconcilaition Less: Favorable temporary difference -$289,000.00 hypothetical income tax Rate Add: Unfavorable temporary difference $173,000.00 Effective Tax Rate Less: Favorable permanent difference -$205,000.00 Tax Benefit from Permanent ddifference Taxable income $530,000.00 Tax rate Effective Tax Rate Reconcilaition Current income tax expense (530000*21%) $111,300.00 Income Tax Expense (851000*21%) Tax Benefit from Permanent Difference (205000*21%) Computation of Deferred Income Tax Expense or Benefit Provision for Income Tax Favorable temporary difference -$289,000.00 Unfavorable temporary difference $173,000.00 Net Favorable temporary difference -$116,000.00 Tax rate 21% Deferred income tax expense (116000*21%) $24,360.00 -43050 135660 Computation of Effective Income Tax Rate Income tax expense = Current Income tax (111300+24360) =$135660 Effective tax rate =Income tax expense/Pre tax (135660/851000)=15.94%