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:

Pretax income = $1,000,000

Increase in net reserve for warranties = $25,000

Exceed in Tax depreciation = $100,000

Subtracted dividends received = $15,000

Therefore,

The Book equivalent taxable income will be calculated as;

= Pretax income - Dividends subtracted

or

The Book equivalent taxable income = $1,000,000 - $15,000

or

The book equivalent taxable income = $985,000