Question

Green Corporation reported pretax book income of $1,018,000. During the current year, the net reserve for warranties increased by $50,900. In addition, tax depreciation exceeded book depreciation by $104,500. Finally, Green subtracted a dividends received deduction of $25,450 in computing its current year taxable income. Green's cash tax rate is:

Answer 1

19.37%

Step-by-step explanation:

Calculation to determine what Green's cash tax rate is

First step is to calculate Green's taxable income

Green's taxable income = ($1,018,000 + $50,900- $104,500 - $25,450)*21%

Green's taxable income=$938,950*21%

Green's taxable income=$197,180

Now let Green's cash tax rate

Cash tax rate ={$197,180/$1,018,000}.

Cash tax rate =0.1937*100

Cash tax rate =19.37%

Therefore Green's cash tax rate is 19.37%