Question

Burcham Corporation reported pretax book income of $600,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $300,000 of tax-exempt municipal bond interest. The company's prior-year tax return showed taxable income of $50,000. Compute the company's book equivalent of taxable income. - Use this number to compute the company's total income tax provision or benefit, assuming a tax rate of 34%.

Answer 1

Answer: See explanation

Explanation:

Pre-tax book income = $600,000

Less: Tax exempt interest = $300,000

Book equivalent of taxable income = $600,000 - $300,000 = $300,000

The company's total income tax provision or benefit, assuming a tax rate of 34% will be:

= 34% × $300,000

= 0.34 × $300,000

= $102,000