Question

Ann Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the company’s book equivalent of taxable income. Use this number to compute the company’s total income tax provision or benefit.
book envirement of taxable income?

total income tax provision or benefit?

Answer 1

Answer:

Computation of tax provision or tax benefit:

In the question tax rate is not given , so it was assumed to be 30%, student can replace that rate with his choice although the concept and method are same in calculating the problem:

Particulars	Amount (In $)
Pretax book income	1,000,000 $
Favorable temporary differences	(200,000$)
Equivalent book of income tax	800,000$
Tax rate which was assumed = 30%	240,000 $
Income tax provision	240,000$

Unfavorable temporary difference is not required to be reduced from the books as they are required to be included in the taxable income for tax purposes.

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