Question

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

Answer 1

The hypothetical tax expense =$340,000 with assumption that tax rate is 34%.

Step-by-step explanation:

The above figure is worked out like this=$1,000,000*34%=$340,000

The hypothetical tax expense is pretax income multiplied with statutory income tax rate.

In our scenario pretax book income is $1,000,000 and tax rate is 34%

Please note that 34% tax rate is assumed as the said rate is not given in question.