Chapter 17, Problem 17.1MC

Cavan Company prepared the following reconciliation between book income and taxable income for the current year

Pretax accounting	$1,000,000
Taxable income	(600,000)
Difference	$400,000
Differences
Interest on municipal income	$100,000
Lower financial depreciation	300,000
Total	$400,000

Cavan's effective income tax rate for Year 1 is 30% The depreciation difference will reverse equally over the next 3 years at enacted tax rates as follows

Year	Tax Rate (%)
Year 2	30%
Year 3	25
Year 4	25

In Cavan's Year 1 income statement the current portion of its provision for income taxes should be

1. a. $300,000
2. b. $250,000
3. c. $180,000
4. d. $150,000