Jones Company reported pretax book income of $403,000. Included in the computation were favorable temporary differences of $50,300, unfavorable temporary differences of $20,150, and favorable permanent differences of $40,150. Book equivalent of taxable income is:

Question

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To find the book equivalent of taxable income, adjust the pretax book income by the temporary differences only. Start with the pretax book income of $403,000, add the unfavorable temporary differences of $20,150, and subtract the favorable temporary differences of $50,300. The permanent differences do not affect taxable income. Calculation: $403,000 - $50,300 + $20,150 = $372,850.

Jones Company Reported Pretax Book Income of $403,000