Krasco Inc.'s auditors prepared the following reconciliation between book and taxable income. The corporation has a 21% tax rate.Book income before tax?$ 8,288,900??Net permanent differences?(35,770)?Net temporary differences? 112,400??Taxable income?$ 8,365,530??a. Compute Krasco's tax expense per books and tax payable. b. Compute Krasco's net increase in deferred tax assets or deferred tax liabilities (identify which) for the year.
What will be an ideal response?
a. Tax expense per books is $1,733,157 ([$8,288,900 ? $35,770 permanent differences] × 21%). Tax payable is $1,756,761 ($8,365,530 × 21%).
b. Krasco's net deferred tax assets increase by $23,604 ($112,400 unfavorable temporary differences × 21%).
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