Question

Green Corporation reported pretax book income of $1,028,000. During the current year, the net reserve for warranties increased by $51,400. In addition, tax depreciation exceeded book depreciation by $107,000. Finally, Green subtracted a dividends received deduction of $25,700 in computing its current-year taxable income. Green's cash tax rate is:

Answer 1

the cash rate is 92.09%

Step-by-step explanation:

The computation of the cash tax rate is shown below:

= Pre tax income + increased net reserve warranties - book depreciation - dividend

= $1,028,000 + $51,400 - $107,000 - $25,700

= $946,700

Now the cash rate is

= $946,700 ÷ $1,028,000 × 100

= 92.09%

Hence, the cash rate is 92.09%