Question

Tuna Corporation reported pretax book income of $1,008,000. During the current year, the net reserve for warranties increased by $29,000. In addition, book depreciation exceeded tax depreciation by $108,000. Finally, Tuna subtracted a dividends received deduction of $19,000 in computing its current-year taxable income. Book equivalent of taxable income is:

Answer 1

$989,000

Step-by-step explanation:

The computation of the book equivalent of the taxable income is given below:

Pretax book income $1,008,000

Less: Favorable permanent differences $19,000

Book Equivalent of Taxable Income $989,000

We simply deduct the dividend deduction from the pretax book income so that the book equivalent of taxable income would be come