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:a. $236,250 tack expense

b. $233,100 tax expense
c. $210,000 tax expense
d. $205,800 tax wxpense

Answer 1

b. $233,100 tax expense

Step-by-step explanation:

The computation of the current income tax expense or benefit is shown below:

But before that first we have to need to find out the taxable income i.e

= Pretak book income + increase in net reserve warranties + exceeded amount - dividend deduction

= $1,000,000 + $25,000 + $100,000 - $15,000

= $1,110,000

Now to find out the current income tax expense since the tax rate is not given so we assume the marginal tax rate i.e 21%

So,

= $1,110,000 ×21%

= $233,100

By multiplying the taxable income with the tax rate we can get the income tax expense