Cass Corporation reported pretax book income of $10,740,000.
During the current year, the reserve for bad debts increased by
$247,500. In addition, tax depreciation exceeded book depreciation
by $290,000. Cass Corporation sold a fixed asset and reported book
gain of $110,000 and tax gain of $143,500. Finally, the company
received $329,000 of tax-exempt life insurance proceeds from the
death of one of its officers. Compute the company’s current income
tax expense or benefit. (Round your final answers to
nearest whole dollar amount. Amounts to be deducted should be
indicated by a minus sign.)
Solution:
Pretax book income | 10,740,000 |
Increase in bad debt reserve | 247,500 |
Excess tax depreciation | -290,000 |
Excess tax over book gain (143,500-110,000) | 33,500 |
Tax-exempt life insurance proceeds | -329,000 |
TAXABLE INCOME | 10,402,000 |
Tax rate (21%) | 21% |
Current income tax expense | 2,184,420 |
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