Cardinal Corporation reported pretax book income of $3,000,000. During the current year, the reserve for bad debts increased by $200,000. In addition, book depreciation exceeded tax depreciation by $100,000. Cardinal sold a fixed asset and reported a book gain of $60,000 and a tax gain of $80,000. Finally, Cardinal deducted $50,000 of domestic production activities deduction on its tax return. Compute Cardinal's current income tax expense or benefit.
What will be an ideal response?
$686,700 current income tax expense.
| Pretax book income | $ | 3,000,000 | |
| Increase in bad debt reserve | 200,000 | ||
| Excess book depreciation | 100,000 | ||
| Excess tax over book again | 20,000 | ||
| Domestic manufacturing deduction | (50,000 | ) | |
| Taxable income | $ | 3,270,000 | |
| × 21% | × 21 | % | |
| Current income tax expense | $ | 686,700 | |
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