Question

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

Answer 1

462,000 taxable income

38,000 deferred tax benefit

Step-by-step explanation:

500,000

+5,000 reverse bad debt

-40,000 tax dep > book dep

-3,000

462,000 taxable income