First Bank has some questions as to the tax-free nature of $5 million of governmental bonds held

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First Bank has some questions as to the tax-free nature of $5 million of governmental bonds held in its investment portfolio. This amount is excluded from First Bank’s taxable income of $55 million. Management has determined that there is a 65% chance that the tax-free status of this entire amount of interest can’t withstand scrutiny of taxing authorities. Assuming a 25% tax rate, what amount of income tax expense should the bank report?

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Intermediate Accounting

ISBN: 978-1260481952

10th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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