Marlin Corporation reported pretax book income of $1,011,000. During the current year, the net reserve for warranties increased by $27,200. In addition, book depreciation exceeded tax depreciation by $101,100. Finally, Marlin subtracted a dividends received deduction of $16,100 in computing its current year taxable income. Using a tax rate of 34%, Marlin’s current income tax expense or benefit would be:
$392,836.
$381,888.
$343,740.
$294,644.
Answer: Marlin’s current income tax expense or benefit= $381,888.
Working notes for the above answer is as under
| pretax book income | 1,011,000 |
| warranties increased | 27,200 |
| depreciation exceeded tax depreciation |
101,100 |
| dividends received deduction | -16,100 |
| Net | 1,123,200 |
, Marlin using a tax rate of 34%
=1,123,200 * 34%
=$381,888.
