Question

Green Corporation reported pretax book income of $1,012,000. During the current year, the net reserve for warranties increased by $50,600. In addition, tax depreciation exceeded book depreciation by $103,000. Finally, Green subtracted a dividends received deduction of $25,300 in computing its current year taxable income. Green's cash tax rate is:

Answer 1

19.38%

Step-by-step explanation:

Green corporation reported pretax book income as $1,012,000

The net reserve warranties increased by $50,600

Tax depreciation exceeded book depreciation by $103,000

The dividend received a deduction of $25,300

Cash tax rate= taxes payable/pre tax book income

The first step is to calculate the taxes payable

= $1,012,000 + $50,600 - $103,000 - $25,300 × 21%

= $934,300× 0.21

= $196,203

Therefore the cash tax rate can be calculated as follows

Cash tax rate= $196,203/$1,012,000

= 0.1938

= 19.38%

Hence Green's cash tax rate is 19.38%