Hafnaoui Company reported pretax net income from continuing operations of $903,500 and taxable income of $712,500. The book-tax difference of $191,000 was due to a $242,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $117,000 due to an increase in the reserve for bad debts, and a $66,000 favorable permanent difference from the receipt of life insurance proceeds. d. Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent. Note: Amounts to be deducted should be indicated by a minus sign. Round your percentages to 2 decimal places. ETR reconciliation (in $) Income tax expense at 21% Income tax provision ETR reconciliation (in %) Hypothetical income tax rate Effective tax rate 21.00% % %
Hafnaoui Company reported pretax net income from continuing operations of $903,500 and taxable income of $712,500. The book-tax difference of $191,000 was due to a $242,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $117,000 due to an increase in the reserve for bad debts, and a $66,000 favorable permanent difference from the receipt of life insurance proceeds. d. Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent. Note: Amounts to be deducted should be indicated by a minus sign. Round your percentages to 2 decimal places. ETR reconciliation (in $) Income tax expense at 21% Income tax provision ETR reconciliation (in %) Hypothetical income tax rate Effective tax rate 21.00% % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hafnaoui Company reported pretax net income from continuing operations of $903,500 and taxable income of $712,500.
The book-tax difference of $191,000 was due to a $242,000 favorable temporary difference relating to depreciation, an
unfavorable temporary difference of $117,000 due to an increase in the reserve for bad debts, and a $66,000 favorable
permanent difference from the receipt of life insurance proceeds.
d. Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent.
Note: Amounts to be deducted should be indicated by a minus sign. Round your percentages to 2 decimal places.
ETR reconciliation (in $)
Income tax expense at 21%
Income tax provision
ETR reconciliation (in %)
Hypothetical income tax rate
Effective tax rate
21.00 %
%
%
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