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Calvin Corporation reported pretax book income of $450,000. Tax depreciation exceeded book depreciation by $150,000. The...

Calvin Corporation reported pretax book income of $450,000. Tax depreciation exceeded book depreciation by $150,000. The company received $200,000 of tax- exempt municipal bond interest income. The company paid $10,000 in tax fines and penalties.

What is pre-tax (book) income adjusted only for permanent differences?

I.

$90,000
II.

$110,000
III.

$300,000
IV.

$260,000
V.

$440,000
VI.

None of the above
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Homework Answers

Answer #1

The correct answer will be IV. $260,000,

Explanation:

-The amount of "Tax fines and penalities" i.e. $10,000 is already deducted from the book income but this is not deductible expenses, so it will be added back.

-Depreciation is not a permanent difference so it will not include for calculation.

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