Question

Cass Corporation reported pretax book income of $10,600,000. During the current year, the reserve for bad debts increased by $172,500. In addition, tax depreciation exceeded book depreciation by $227,500. Cass Corporation sold a fixed asset and reported book gain of $87,000 and tax gain of $114,500. Finally, the company received $270,000 of tax-exempt life insurance proceeds from the death of one of its officers. Compute the company’s current income tax expense or benefit.

Answer 1

Answer:

Tax Income Expense   10,600,000

Tax income payable                 10,302,500

deffered tax liability                       297,500

Explanation:

pretax book income                 10,600,000

reverse bad debt                            172,500

additional dep                               -227,500

book asset sale gain                       -87,000

taxable asset sale gain                    114,500

tax expemt insurance proceed    -270,000

Taxable income                         10,302,500