Question

Robinson Company had a net deferred tax liability of $34,476 at the beginning of the year, representing a net taxable temporary difference of $101,400 (taxed at 34%). During the year, Robinson reported pretax book income of $401,400. Included in the computation were favorable temporary differences of $51,400 and unfavorable temporary differences of $20,700. During the year, Congress reduced the corporate tax rate  from 34% to 21%. Robinson's deferred income tax expense or benefit for the current year would be:

• Net deferred tax benefit of $6,447.
• Net deferred tax expense of $6,447.
• Net deferred tax benefit of $6,735.
• Net deferred tax expense of $6,735.

TarHeel Corporation reported pretax book income of $1,026,000. During the current year, the net reserve for warranties increased by $101,300. In addition, tax depreciation exceeded book depreciation by $206,500. Finally, TarHeel subtracted a dividends received deduction of $55,200 in computing its current year taxable income. TarHeel's accounting effective tax rate is:

• 21%.

• 19.87%.
• 18.74%.
• 17.61%.

Jones Company reported pretax book income of $405,000. Included in the computation were favorable temporary differences of $50,500, unfavorable temporary differences of $20,250, and favorable permanent differences of $40,250. Book equivalent of taxable income is:

• $445,250.
• $405,000.
• $364,750.
• $334,250.

Answer 1