Chan Company's Statutory Income Tax Rate Is 40

Essay

Chan Company's statutory income tax rate is 40%. Chan forecasted pre-tax income of $200,000 for 2006, with no temporary differences between financial income and taxable income. Chan forecasted the following permanent differences between financial income and taxable income for 2006: Dividend received deduction, $40,000; Premiums on officers' life insurance, $30,000.
Prepare a working paper to compute Chan Company's estimated effective income tax rate for 2006.