Song Incorporated reported pretax book income of $10,000,000. At the end of the year, the reserve for bad debts had a balance of $100,000; there was no beginning balance in the account. In addition, tax depreciation exceeded book depreciation by $200,000. Song Incorporated sold a fixed asset and reported book gain of $50,000 and tax gain of $75,000. Song's beginning book (tax) basis in its fixed assets was $1,000,000 ($800,000) and its ending book (tax) basis is $1,500,000 ($1,125,000). Finally, the company received $250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Assuming a tax rate of 21 percent, compute the company's deferred income tax expense or benefit. Note: Enter all numbers as a positive number and indicate whether either a deferred tax expense or a deferred tax liability.
Song Incorporated reported pretax book income of $10,000,000. At the end of the year, the reserve for bad debts had a balance of $100,000; there was no beginning balance in the account. In addition, tax depreciation exceeded book depreciation by $200,000. Song Incorporated sold a fixed asset and reported book gain of $50,000 and tax gain of $75,000. Song's beginning book (tax) basis in its fixed assets was $1,000,000 ($800,000) and its ending book (tax) basis is $1,500,000 ($1,125,000). Finally, the company received $250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Assuming a tax rate of 21 percent, compute the company's deferred income tax expense or benefit. Note: Enter all numbers as a positive number and indicate whether either a deferred tax expense or a deferred tax liability.
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 16DQ
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Transcribed Image Text:Song Incorporated reported pretax book income of $10,000,000. At the end of the year, the reserve for bad debts had a balance of
$100,000; there was no beginning balance in the account. In addition, tax depreciation exceeded book depreciation by $200,000.
Song Incorporated sold a fixed asset and reported book gain of $50,000 and tax gain of $75,000. Song's beginning book (tax) basis in
its fixed assets was $1,000,000 ($800,000) and its ending book (tax) basis is $1,500,000 ($1,125,000). Finally, the company received
$250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Assuming a tax rate of 21 percent, compute the
company's deferred income tax expense or benefit.
Note: Enter all numbers as a positive number and indicate whether either a deferred tax expense or a deferred tax liability.
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