Question

Problem 3-12 (LO. 2)

Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,000 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini records no other temporary or permanent differences. Assuming that the pertinent U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 8%.

Compute Mini's total income tax expense, current income tax expense, and deferred income tax expense.

a. Current income tax expense $ b. Deferred income tax benefit $ c. Total income tax expense $

Answer 1

Mini, inc, eams pretax books net income of $750000 in 2016. Maine dedu cted $20000 in bad debt expense for book pusposes. This expenses is not yet deductible for tax purposes. mini records no other temporary or permanent differences. Assuming tax rate return on capital 21% 8% . cas Casrent income tax expense = Taxable incomex Tax rate = 750000 X 21% .. = $ 161700 (b) Deferred income tax benefit - deductible temporary difference X Tar rate = $ 2000 x 207 = $4200.. :

1 (c) Total, income tax expense of = Ceurrent tax-Deferred tan benefit = $161700~ $4200 . & 1575oo.