Question

Randolph Company reported pretax net income from continuing operations of $823,000 and taxable income of $550,000....

Randolph Company reported pretax net income from continuing operations of $823,000 and taxable income of $550,000. The book-tax difference of $273,000 was due to a $215,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $154,000 due to an increase in the reserve for bad debts, and a $212,000 favorable permanent difference from the receipt of life insurance proceeds. a. Compute Randolph Company’s current income tax expense b. Compute Randolph Company’s deferred income tax expense or benefit. c. Compute Randolph Company’s effective tax rate. (Round your answer to 2 decimal places.)

Homework Answers

Answer #1

1)

Pre-tax net income

823,000

Favorable temporary difference

-215,000

Unfavorable temporary difference

154,000

Favorable permanent difference

-212,000

Taxable income

550,000

34%

34%

Current income tax payable

187,000

 

2)

Favorable temporary difference

-215,000

Unfavorable temporary difference

154,000

Net Favorable temporary difference

-61,000

34%

34%

Deferred tax expense (liability)

-20740

 

3) Total income tax provision = 187,000 + 20,740 = 207,740

Effective tax rate = 207,740 / 723,000 * 100 = 28.73%

 

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