Marlin Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciationexceeded tax depreciation by $100,000. Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Using a tax rate of34%, Marlin's current income tax expense or benefit would be:

Question

Quizplus · Accepted Answer

Marlin Corporation's current year taxable income can be calculated as follows:

Pretax book income: $1,000,000 
(+) Increase in warranty reserve: $25,000 
(+) Book depreciation in excess of tax depreciation: $100,000 
(-) Dividends received deduction: $15,000

Taxable income: $1,110,000

Marlin's current income tax expense can be calculated by applying the tax rate of 34%:

Current income tax expense = Taxable income x Tax rate 
= $1,110,000 x 0.34 
= $377,400

Therefore, the correct answer is C.

Marlin Corporation Reported Pretax Book Income of $1,000,000