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

Exercise 75

You have been assigned to compute the income tax provision for Tulip City Flowers, Inc. (TCF) as of December 31, 2011. The Company's federal income tax rate is 34%. The Company's Income Statement for 2011 is provided below:
You have identified the following permanent differences:
Interest income from municipal bonds: $10,000
Nondeductible stock compensation: $5,000
Domestic production activities deduction: $8,000
Nondeductible fines: $1,000
TCF prepared the following schedule of temporary differences from the beginning of the year to the end of the year:

a. Compute TCF's current income tax expense or benefit for 2011.b. Compute TCF's deferred income tax expense or benefit for 2011.c. Prepare a reconciliation of TCF's total income tax provision with its hypothetical income tax expense in both dollars and rates.
d. Assume TCF's tax rate increased to 35% in 2011. Recompute TCF's deferred income tax expense or benefit for 2011 using the following template: