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Purple Rose Corporation reported pretax book income of $500,000.
Tax depreciation exceeded book depreciation by $300,000.
In addition, the company received $250,000 of tax-exempt life insurance proceeds.
The prior-year tax return showed taxable income of $100,000.
Compute Purple Rose's current income tax expense or benefit.

Respuesta :

Answer: $68,000

Explanation:

Let us assume that we are given a tax rate of 34% to use in computing the question. Therefore, Purple Rose's current income tax expense or benefit will be:

Pre-tax book income = $500,000

Less: Tax depreciation = $300,000

Net Income = $500,000 - $300,000 = $200,000

Current income tax expenses at 34% will then be:

= 34% × Net income

= 34/100 × $200,000

= $68,000

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