Packard Corporation reported pretax book income of $500,000. Included in the computation were favorable temporary differences of $10,000, unfavorable temporary differences of $100,000, and unfavorable permanent differences of $90,000. Assuming a tax rate of 34%, the Corporation's current income tax expense or benefit would be:

Question

Quizplus · Accepted Answer

The correct answer is A because the current income tax expense is calculated as follows:Pretax book income: $500,000Temporary differences: $10,000 (favorable) - $100,000 (unfavorable) = -$90,000Permanent differences: -$90,000Taxable income: $500,000 - $90,000 = $410,000Current income tax expense: $410,000 x 34% = $231,200

Packard Corporation Reported Pretax Book Income of $500,000