Question

# Burcham Corporation reported pretax book income of \$707,500. Tax depreciation exceeded book depreciation by \$565,000. In...

Burcham Corporation reported pretax book income of \$707,500. Tax depreciation exceeded book depreciation by \$565,000. In addition, the company received \$272,000 of tax-exempt municipal bond interest. The company’s prior-year tax return showed taxable income of \$62,000. Compute the company’s book equivalent of taxable income. Use this number to compute the company’s total income tax provision or benefit.

 Company’s book equivalent of taxable income \$435,500 Company’s total income tax provision or benefit \$91,455

Explanation:

 Pretax book income \$707,500 Less: Tax-exempt municipal bond interest (\$272,000) Company’s book equivalent of taxable income \$435,500 * Tax rate (Note 1) 21 % Company’s total income tax provision or benefit \$91,455

Note 1: Since the tax rate is not mentioned in the question, the tax rate is taken as nominal federal corporate tax rate of 21 %.