Question

Marlin Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Marlin's current income tax expense or benefit would be:

Answer 1

B $377,400

Step-by-step explanation:

Pretax Income = $1000,000

First following adjustment in the pretax income will be made

Add back the increase in reserve warranties because it will result in increase of warranty expense by $25,000.

Exceeding Book depreciation will be added to the book income.

Depreciation deduction will decrease the boon income.

Income chargeable to tax = $1,000,000 + $25,000 + $100,000 - $15,000

Income chargeable to tax = $1,110,000

Now Calculate the Income tax amount using rate of 34%

Income tax Expense = $1,110,000 x 34% = 377,400