US CMA Part 1 · Chapter 1 · Question 15 of 23
Fenwick Corp has pretax financial income of $400,000, which includes $20,000 of tax-exempt municipal bond interest. Tax depreciation exceeds book depreciation by $50,000 this year. The tax rate is 21% for all years. What is Fenwick's current income tax payable for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $69,300
Explanation
Taxable income = $400,000 - $20,000 (permanent difference) - $50,000 (temporary difference) = $330,000. Current tax payable = $330,000 x 21% = $69,300. Total tax expense would be $79,800, the difference of $10,500 being the increase in the deferred tax liability.
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