McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 15

Randolph Company reported pre-tax net income from continuing operations of $800,000 and taxable income of $500,000.The book-tax difference of $300,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $80,000 due to an increase in the reserve for bad debts, and a $180,000 favorable permanent difference from the receipt of life insurance proceeds.Randolph Company's applicable tax rate is 34%.?a.Compute Randolph Company's current income tax expense.?b.Compute Randolph Company's deferred income tax expense or benefit.?c.Compute Randolph Company's effective tax rate.?d.Provide a reconciliation of Randolph Company's effective tax rate with its hypothetical tax rate of 34%.