Question

Marlin Corporation reported pretax book income of $1,005,000. During the current year, the net reserve for warranties increased by $26,000. In addition, book depreciation exceeded tax depreciation by $100,500. Finally, Marlin subtracted a dividends received deduction of $15,500 in computing its current year taxable income. Marlin's current income tax expense or benefit would be:

Answer 1

Answer: $234360

Step-by-step explanation:

Marlin's current income tax expense or benefit would be calculated thus:

Pre-tax book income = $1,005,000

Add: net reserve for warranties = $26,000

Add: Increase in Book depreciation over tax depreciation = $100,500.

Less: Dividend deduction = ($15500)

Taxable income = $1,116,000

Since tax rate = 21%, then the income expense will be:

= 21% × $1,116,000

= 0.21 × $1,116,000

= $234360