Question

1. For the year ended December 31, 2017, Mont Co. recorded pre-tax book income of $600. To compute taxable income for federal income tax purposes, the following items should be noted:

Income from tax-exempt municipal bonds included in book income.………………………	$60
Depreciation deductible for tax purposes in excess of depreciation recorded in GAAP-based book income…………………………………………………………………………………	$120
Tax-exempt proceeds received from life insurance on the death of officer included in book income……………………………………………………………………………………….	$100
Statutory corporate income tax rate.…………………………………………………………	30%

1. What amount should Mont Co. report on December 31, 2017 as its federal income taxes payable? What is the Mont Co.’s effective tax rate? By how much did deferred tax liabilities increase?

Answer 1