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 
  
 

Business

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