Question

rimas corporation reported pretax book income of $1,190,000. included in the computation were favorable temporary differences of $140,000, unfavorable temporary differences of $234,000, and favorable permanent differences of $138,000. 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

The book equivalent of taxable income for Rimas Corporation is $1,234,000. To compute the total income tax provision or benefit, the taxable income should be multiplied by the applicable tax rate.

Step-by-step explanation:

The book equivalent of taxable income can be calculated by adjusting the pretax book income for temporary differences and permanent differences. In this case, the favorable temporary differences of $140,000 and the favorable permanent differences of $138,000 should be added to the pretax book income, while the unfavorable temporary differences of $234,000 should be subtracted.

Book equivalent of taxable income = Pretax book income + Favorable temporary differences + Favorable permanent differences - Unfavorable temporary differences

Book equivalent of taxable income = $1,190,000 + $140,000 + $138,000 - $234,000 = $1,234,000

To compute the total income tax provision or benefit, we need to determine the taxable income and apply the tax rate. The income tax provision will be the taxable income multiplied by the applicable tax rate.