Grand Corporation reported pre-tax book income of $600,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $300,000 of tax-exempt municipal bond interest. The company’s prior year tax return showed taxable income of $40,000. Assuming a tax rate of 21%, compute the company’s current income tax expense or benefit. (Enter the answer as a positive.) Please explain step by step because I'm not getting the correct answer. 20 Ch. 6-43212223WN242556272868293031328334Pre-tax book incomeExcess tax depreciationTax-exempt interest incomeNet operating lossPrior year taxable incomeNOL from the prior yearTax RateCurrent income tax benefit600,000(400,000) Enter as a negative(300,000) Enter as a negative(100,000)40,00021,00021%4,410Beginning in 2018, the entire $100,000 NOL can only be carried forward andwill be recorded as a deferred tax asset (benefit) of $21,000.There are no longer any carryback provisions for corporate NOL's.

A Net Operating Loss (NOL) occurs when a business's allowable tax deductions exceed its taxable…

Answered: Grand Corporation reported pre-tax book…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Grand Corporation reported pre-tax book income of $600,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $300,000 of tax-exempt municipal bond interest. The company’s prior year tax return showed taxable income of $40,000. Assuming a tax rate of 21%, compute the company’s current income tax expense or benefit. (Enter the answer as a positive.) Please explain step by step because I'm not getting the correct answer.

20 Ch. 6-43
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WN
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56
27
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83
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Pre-tax book income
Excess tax depreciation
Tax-exempt interest income
Net operating loss
Prior year taxable income
NOL from the prior year
Tax Rate
Current income tax benefit
600,000
(400,000) Enter as a negative
(300,000) Enter as a negative
(100,000)
40,000
21,000
21%
4,410
Beginning in 2018, the entire $100,000 NOL can only be carried forward and
will be recorded as a deferred tax asset (benefit) of $21,000.
There are no longer any carryback provisions for corporate NOL's.

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