Question

Tuna 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, Tuna subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Book equivalent of taxable income is:

Answer 1

Answer:

$985,000

Explanation:

Given that,

Pretax book income = $1,000,000

Increase in net reserve for warranties = $25,000

Book depreciation = $100,000

Dividend received deduction = $15,000

Book equivalent of taxable income:

= Pretax book income - Dividend received deduction

= $1,000,000 - $15,000

= $985,000

Therefore, the Book equivalent of taxable income is $985,000.