Ann Corporation reported pretax book income of $1,270,000. Included in the computation were favorable temporary differences of $225,000, unfavorable temporary differences of $128,000, and favorable permanent differences of $140,000. Compute the company’s book equivalent of taxable income. Use this number to compute the company’s total income tax provision or benefit.

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Shariqahmed Shariqahmed · Answer 1 · 2020-03-27T02:14:02+01:00

Answer:

The total Tax Provision of Ann Corporation is $384,200

Explanation:

Assuming That the Tax Rate is 34%

In the current scenario of Ann Corporation, Following Computation of total income tax benefits taken under the tax rate of 34%.

Per-Tax Book Income = $1,270,000

Favorable Temporary Differences = $225,000

Unfavorable Temporary Differences = $128,000

Favorable Permanent Differences = $140,000

Thus,

Equivalent Book of Income Tax = Per-Tax Book Income - Favorable Permanent Differences

Equivalent Book of Income Tax = $1,270,000 - $140,000

Equivalent Book of Income Tax = $1,130,000

Overall Tax Provision = Equivalent Book of Income Tax × 34%

Overall Tax Provision = $1,130,000 × 34%

Overall Tax Provision = $384,200

Therefore, the total Tax Provision of Ann Corporation is $384,200