f $590,000. The book–tax difference of $369,000 was due to a $205,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $88,000 due to an increase in the reserve for bad debts, and a $252,000 favorable permanent difference from the receipt of life insurance proceeds.   b. Compute Randolph Company’s deferred income tax expense or benefit. c. Compute Randolph Company’s effective tax rate

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Randolph Company reported pretax net income from continuing operations of $959,000 and taxable income of $590,000. The book–tax difference of $369,000 was due to a $205,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $88,000 due to an increase in the reserve for bad debts, and a $252,000 favorable permanent difference from the receipt of life insurance proceeds.

 

b. Compute Randolph Company’s deferred income tax expense or benefit.

c. Compute Randolph Company’s effective tax rate.

 

d. Provide a reconciliation of Randolph Company's effective tax rate with its hypothetical tax rate of 21 percent. (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%
Tax benefit from permanent difference
Income tax provision
ETR reconciliation (in %)
Hypothetical income tax rate
21.00 %
Tax benefit from permanent difference
%
Effective tax rate
%
Transcribed Image Text:d. Provide a reconciliation of Randolph Company's effective tax rate with its hypothetical tax rate of 21 percent. (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% Tax benefit from permanent difference Income tax provision ETR reconciliation (in %) Hypothetical income tax rate 21.00 % Tax benefit from permanent difference % Effective tax rate %
Expert Solution
Step 1

Deferred income tax is a liability to the company which arises due to differences in tax laws and accounting methods, the total tax expense is not equal to tax reported.

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