KellerCo reports $5,000,000 of U.S. taxable income, the same as its book income,
ID: 2339802 • Letter: K
Question
KellerCo reports $5,000,000 of U.S. taxable income, the same as its book income, as there are no temporary book-tax differences this year. KellerCo is subject to a 21% Federal income tax rate. Its book-tax differences include the following.
1,500,000
Construct KellerCo's tax rate reconciliation for its GAAP tax footnote. Use either dollars or percentages in your reconciliation.
For the percentages, round to two decimal places.
Nondeductible business meals $400,000 Tax depreciation in excess of book depreciation1,500,000
Explanation / Answer
SOLUTION :-
TAX RECONCILIATION - KELLARCO
STATUTORY TAX/TAX RATE ON BOOK INCOME
($5,000,000 * 21% = 1,050,000)
ADD
TAX EFFECT OF NON DEDUCTABLE BUSINESS MEAL EXPENSES
($400,000 * 21% = 84,000)
LESS
TAX EFFECT OF EXCESS TAX DEPRECIATION
(1,500,000*21% = 315,000)
AMOUNT($) PERCENTAGESTATUTORY TAX/TAX RATE ON BOOK INCOME
($5,000,000 * 21% = 1,050,000)
1,050,000 21%ADD
TAX EFFECT OF NON DEDUCTABLE BUSINESS MEAL EXPENSES
($400,000 * 21% = 84,000)
84,000 1.68%LESS
TAX EFFECT OF EXCESS TAX DEPRECIATION
(1,500,000*21% = 315,000)
315,000 6.3% INCOME TAX PROVISION / EFFECTIVE TAX RATE 819,000 16.38%Related Questions
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