Kantner, Inc., a domestic corporation, reported two permanent book-tax differenc
ID: 2808879 • Letter: K
Question
Kantner, Inc., a domestic corporation, reported two permanent book-tax differences. It earned $7,800 in tax-exempt municipal bond interest, and it reported $850 in nondeductible business meals expense. Kantner's book income before tax is $50,000. Assume a 21% Federal corporate tax rate and no valuation allowance.
Provide the information for the income tax footnote rate reconciliation for Kantner.
When computing the percentages, do not round.
Dollars Percentage
Tax on book income at statutory rate $ % Tax exempt income % Nondeductible business meals % Provision for income tax expenseExplanation / Answer
The company earned $7,800 before taxes of which it should pay 21% income taxes, however the company earned certain income for which he is not liable to pay tax i.e. 7,800 and incurred certain expenses on which the company cant avail credit i.e. 850. Tax on Book Income (a) 50,000*21% 10,500 21% This percentage is calculated as amount divided by total Income i.e. 10,500/50,000 Tax exempt income (b) 7,800*21% 1,638 3.28% 1,638/50,000 = 3.28% Non Deductible business meals © 850*21% 179 0.36% 179/50,000 = 0.79% Provision for income tax expense a-b+c 9,041 18.08%
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