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Randolph Company reported pretax net income from continuing operations of $1,077,500 and taxable income of $657,500....

Randolph Company reported pretax net income from continuing operations of $1,077,500 and taxable income of $657,500. The book-tax difference of $420,000 was due to a $252,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $86,000 due to an increase in the reserve for bad debts, and a $254,000 favorable permanent difference from the receipt of life insurance proceeds. Compute Randolph Company’s effective tax rate

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Taxable Amount Tax Rate Tax
Taxable Income $        657,500 21% $         138,075
Net Favorable Temporary Difference (Deferred Tax Liability) $        166,000 21% $           34,860
252000-86000
Total Income Tax Provision a $         172,935
Pretax Income b $      1,077,500
effective Tax Rate a/b 16.05%
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