S & C Company's income before taxes is $410,000, and income tax expense is $115,000. S & C has a deferred tax asset of $100,000 and records a valuation allowance of $25,000. What is S & C's effective tax rate before and after recording the valuation allowance? (Do not round intermediate calculations. Round your final answer to the nearest whole percent.)

Question

Quizplus · Accepted Answer

The effective tax rate before the valuation allowance is calculated as income tax expense divided by income before taxes: $115,000 / $410,000 = 28%. After recording the valuation allowance, the effective tax rate is calculated by adding the valuation allowance to the income tax expense: ($115,000 + $25,000) / $410,000 = 34%.

S & C Company's Income Before Taxes Is $410,000, and Income