Question

Marlin Corporation reported pretax book income of $1,018,000. During the current year, the net reserve for warranties increased by $28,600. In addition, book depreciation exceeded tax depreciation by $101,800. Finally, Marlin subtracted a dividends received deduction of $16,800 in computing its current year taxable income. Marlin's current income tax expense or benefit would be:

Answer 1

Answer: See explanation

Step-by-step explanation:

From your question, you didn't tell us the tax rate to use. Let's assume a tax rate of 34% is used.

The following can be deduced from the question:

Reported pretax book income = $1,018,000

Add: Increase in warranty = $28600

Add: Excess depreciation = $101,800

Less: Dividends received deduction = $16,800

Adjusted income = $1131600

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

= 34% × $1,131,600

= 0.34 × $1,131,600

= $384,744