TarHeel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Finally, TarHeel subtracted a dividends received deduction of $50,000 in computing its current-year taxable income. TarHeel's accounting effective tax rate is:

Question

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To calculate the effective tax rate, we first need to adjust the pretax book income for the differences between book and tax treatments. The net reserve for warranties ($100,000) and the dividends received deduction ($50,000) decrease taxable income, while the excess of tax depreciation over book depreciation ($200,000) increases taxable income. Thus, the taxable income is $1,000,000 - $100,000 - $50,000 + $200,000 = $1,050,000. Assuming a corporate tax rate of 21%, the tax expense is 21% of $1,050,000 = $220,500. The effective tax rate is the tax expense divided by the pretax book income: $220,500 / $1,000,000 = 22.05%. However, none of the options exactly match this calculation, suggesting a need to reevaluate the approach or the interpretation of the options provided. Given the options and the typical approach to calculating effective tax rates, the closest match or intended calculation might involve a different understanding or a simplification not accounted for in the direct calculation above. Revisiting the calculation with a focus on the given options and considering possible rounding or simplification in the question's context might lead to selecting the closest available option based on the standard method of calculating effective tax rates. However, without additional specific tax rates or adjustments, the direct calculation does not match the provided options, indicating a potential misunderstanding in the question's setup or the need for clarification on the calculation method intended by the question.

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