Question

Marlin Corporation reported pretax book income of $1,003,000. During the current year, the net reserve for warranties increased by $25,600. In addition, book depreciation exceeded tax depreciation by $100,300. Finally, Marlin subtracted a dividends received deduction of $15,300 in computing its current-year taxable income. Marlin's current income tax expense or benefit would be:

Answer 1

Answer:

Explanation:

pretax book income 1,003,000

warranties increased 25,600

depreciation exceeded tax depreciation 100,300

dividends received deduction -15,300

Net amount $1,113,600

Taxable amount is $1,113,600

In order to find income tax expense or benefit, multiply the taxable amount by tax rate.

Answer 2

Answer:

Marlin's current income tax expense would be $233,856.00.

Explanation:

Based on the information provided in the question, Marlin's current income tax expense or benefit can be calculated using the following equation:

Current income tax expense or benefit = (Pretax book income + Increase in net reserve for warranties + Excess of book depreciation over tax depreciation - dividends received already subtracted) × Tax rate

Since tax rate for corporation is 21%, we substitute for all the values in equation above and estimate as follows:

Current income tax expense or benefit = ($1,003,000 + $25,600 + $100,300 − $15,300) × 21%

                                                                 = $1,113,600 × 21%

Current income tax expense or benefit = $233,856.00

Since it is a positive amount, Marlin's current income tax expense would be $233,856.00.