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Question & Answer: Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable…..

Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable temporary differences of $500,000, unfavorable temporary differences of $700,000, and unfavorable permanent differences of $200,000. Usinga tax rate of 34%, compute Herons current income tax expense or benefit.

Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable temporary differences of $500,000, unfavorable temporary differences of $700,000, and unfavorable permanent differences of $200,000. Using a tax rate of 34%, compute Heron’s current income tax expense or benefit.

Expert Answer

 

Heron’s current income tax expense or benefit would be:

= ($4,000,000 – $500,000 + $700,000 + $200,000) × 34%

= $4,400,000 × 34%

= $1,496,000

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