Question

TarHeel Corporation reported pretax book income of $1,026,000. During the current year, the net reserve for warranties increased by $101,300. In addition, tax depreciation exceeded book depreciation by $206,500. Finally, TarHeel subtracted a dividends received deduction of $55,200 in computing its current-year taxable income. TarHeel's accounting effective tax rate is:
a. 21%.
b. 19.87%.
c. 18.74%.
d. 1761%.

Answer 1

Answer:

Effective accounting tax rate =  17.61%

Explanation:

given data

Pre Tax book income = $1,026,000

Reserve for warranties = $101,300

Tax depreciation = $206,500

Deduction inform of dividends received = $55,200

to find out

accounting effective tax rate

solution

we assume here tax rate is 21 %

So Taxable income will be here as  

Taxable income = [ $1,026,000 + $101,300 ] - [ $206,500 + $55,200 ]

Taxable income = $1,127,300 - $261,700

Taxable income = $865,600

Tax @21% = $865,600 × 21%

Tax  = $181,776

Effective accounting tax rate will be

Effective accounting tax rate = $\frac{181776}{1026000}$  

Effective accounting tax rate =  17.61%