Question

For the year ended December 31, Fox Co.'s books showed income of $900,000 before provision for income tax expense. To compute taxable income for federal income tax purposes, the following items should be noted:

Income from exempt municipal bonds                                                            $ 80,000

Depreciation deducted for tax purposes in excess of depreciation

recorded on the books 200,000

Proceeds received from TERM life insurance on death of officer                    160,000

Estimated tax payments                                                                                             0

Enacted corporate tax rate 40%

What is Fox's net income for the year?

Group of answer choices

$420,000

$716,000

$636,000

$540,000

Answer 1

$636000 is correct answer

Working Note:-Fox Co.
Income Before Provision of Tax	$900,000
Income From Exempt Municipal Bonds	-$80,000
Excess of Depreciation deducted due for Tax Purposes	-$200,000
Proceeds of term Life Insurance	-$160,000
Taxable Income	$460,000
Income Tax Payable (460000* 40%) (a)	$184,000
Deferred Tax Liability (200000*40%) (b)	$80,000
Income Tax Expense (a+b)	$264,000

Net Income :- Incoem Before tax- Tax Expense

900000-264000=$636000