Question

Randolph Company reported pretax net income from continuing operations of $982,500 and taxable income of $612,500. The book-tax difference of $370,000 was due to a $246,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $150,000 due to an increase in the reserve for bad debts, and a $274,000 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

Answert aj caleulate the Randolph company current income tax'- Add: un favourable Temporary difference Current income Tax Amount pre Tax Net Income $984,500 Less: Favourable Temporary Differences $246,000 Less; Favourable per permanent di Aleyences $274.000 $150000 Taxable Income a $612.500 Enacted rate 10 2.1% Current income tax payable (4xB] | $128.625 b) calculate the Randolph de ferred income tax expense.com Deferred Income Ta2 Expenses Amount Favourable Temporary Temporary differences 5246000 Addi un favourable Temporary Differences $150,000 Net favourable Temporary Differences -$96.000 Enacted rate 2.17 Deferred Tax expenses £96.000x217) -20160 c) calculate the Randolph effective Tax rate :- Effective Tax Rate = Total Income provision/pre Tax Net Income! Total income provision = $128,625 + $ 20,160 = $ 148785 Effeclive Tax Rate = $.448785/$ 989.500 = 15.14% :. Effective Tax Rate : 15.14 % d) calculation of the ETP Reconciliation - ETR Reconciliation Amount Income Tax expenses $982,500 X 2177 $206,325 Less Tax Benefit from permanent Diffeance $51540 [$274,000 x 217] Income Tax provision $ 148,785 ETR Reconciliation in(y): 21% Hypothelical Income Tax Rate Less Tazbenefit from permanent Difference 5.86% 1 Effective Tax rate. 15.14% 1987 Tax benefit from permanent Difference = $57 5.86%