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Cremshaw Inc.’s auditors prepared the following detail reconciliation between book and taxable income. Cremshaw’s income tax...

Cremshaw Inc.’s auditors prepared the following detail reconciliation between book and taxable income. Cremshaw’s income tax rate is 21%. Book income before tax $650,000 Bad debt allowance $25,000 Meals ($30,000 * 50%) $15,000 Tax-exempt interest income $(20,000) Wages not paid in 2 ½ months $45,000 Taxable income $715,000 Compute Cremshaw’s financial tax expense and Cremshaw’s tax payable.

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Tax-exempt interest income is excluded from the book income before tax because the Tax-exempt interest income is not consider for income tax (Permanent nature).

Pretax financial income $             650,000
Permanent differences
Less: Tax-exempt interest income $             (20,000)
Pretax financial income after adjusted to permanent differences $             630,000
Temporary differences
Add: Bad debt allowance $               25,000
Add: Meals $               15,000
Add: Wages not paid in 2 ½ months $               45,000
Taxable income $             715,000
Multiply: Tax rate 21%
Income tax payable $             150,150
Pretax financial income after adjusted to permanent differences $             630,000
Multiply: Tax rate 21%
Financial tax expense $             132,300
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