Question

e IH) new doc 201901-22 18 × It Ο ώ | O file:///C:/UserstałalDownloads/new%20doc%202019-01.22%2018.5749%20(1).pdf Baltimore Inc. reported pretax GAAP income of $45,000 in 2020. In analyzing differences between GAAP in- come and taxable income, the company determined that it had deducted S5,000 in nondeductible fines and added $2,800 in tax-exempt municipal interest revenue to GAAP income. Given a statutory tax rate of25%, determine the following a. Taxable income b. Income tax payable c. Income tax expense d. Net income Effective tax rate e. ^ 4x ENG 1/22/2019

Answer 1

Taxable Income Particular GAAP Income Less: Exempt Income Add: Non deductible Fine Taxable Income Amount S 45,000.00 $ 2,800.00 $ 5,000.00 47,200.00 $ Income Tax Payable Taxable Income Tax Rate 47200*25% 11,800 $ 11,800 Income Tax Expense Since the treatment of Fine & Exempt income will not get reversed in following years so this will be permanent difference between taxable income & accounting income. So no deferred tax liability/ assets will be created and Income tax expense will be ual to income tax pavable Net Income Income Before Taxes (GAAP Income) Less Income Tax Expense Income After Taxes (Net Income 45,000.00 11,800.00 33,200.00 Effective Tax Rate 11800/45000 26.22% Tax Expense/GAAP Income