Question

kumara corporation reported pretax book income of $1,030,000. kumara also reports an increase in the taxable temporary differences of $370,000, an increase in the deductible temporary differences of $253,000, and favorable permanent differences of $149,000. assuming a tax rate of 21 percent, compute the company's deferred income tax expense or benefit.

Answer 1

To compute the company's deferred income tax expense or benefit, we need to determine the taxable income and the applicable tax rate. The taxable income is the pretax book income adjusted for the temporary differences and permanent differences. Then, use the tax rate to calculate the deferred income tax expense or benefit.

Step-by-step explanation:

To compute the company's deferred income tax expense or benefit, we first need to determine the taxable income and the applicable tax rate. The taxable income is the pretax book income adjusted for the temporary differences and permanent differences. In this case, the taxable income can be calculated as:

Pretax Book Income + Increase in Taxable Temporary Differences - Increase in Deductible Temporary Differences + Favorable Permanent Differences

Then, we can calculate the deferred income tax expense or benefit by multiplying the taxable income by the tax rate: Taxable Income * Tax Rate.

In this case, the deferred income tax expense or benefit would be ($1,030,000 + $370,000 - $253,000 + $149,000) * 21% = $208,420.