Question

The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars): Pretax accounting income: $ 200 Pretax accounting income included: Overweight fines (not deductible for tax purposes) 5 Depreciation expense 70 Depreciation in the tax return using MACRS: 110 The applicable tax rate is 40%. There are no other temporary or permanent differences. Franklin's taxable income ($ in millions) is:

Answer 1

Answer:

The correct answer is $165 ( Million).

Explanation:

According to the scenario, the given data are as follows:

Pretax accounting income = $200 (Million)

Overweight fines = $5 (Million)

Understated depreciation = $110 - $70 = $40 (million)

So, we can calculate the taxable income by using following formula:

Taxable income = Pretax accounting income + Overweight fines - Understated depreciation

By putting the value, we get

Taxable income = $200 + $5 - $40

= $165 (Million)