Question

burcham corporation reported pretax book income of $710,000. tax depreciation exceeded book depreciation by $525,000. in addition, the company received $250,500 of tax-exempt municipal bond interest. the company's prior-year tax return showed taxable income of $69,000. compute the company's book equivalent of taxable income. use this number to compute the company's total income tax provision or benefit.

Answer 1

To compute the company's book equivalent of taxable income, adjust the pretax book income for the differences in depreciation and tax-exempt interest. The total income tax provision or benefit depends on the applicable tax rate.

Step-by-step explanation:

To compute the company's book equivalent of taxable income, we need to adjust the reported pretax book income for the differences between tax depreciation and book depreciation, as well as for tax-exempt interest.

Adjusted book income = Pretax book income + Tax depreciation - Book depreciation + Tax-exempt interest

= $710,000 + $525,000 - $0 + $250,500 = $1,485,500

The company's total income tax provision or benefit can be calculated by multiplying the adjusted book income by the applicable tax rate. Since the question does not provide the tax rate, a specific value cannot be determined without that information.