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Hafnaoui Company reported pretax net income from continuing operations of $ 8 0 0 , 0 0 0 and taxable income of $ 5 0
Hafnaoui Company reported pretax net income from continuing operations
of $ and taxable income of $ The booktax difference of
$ was due to a $ favorable temporary difference relating to
depreciation, an unfavorable temporary difference of $ due to an
increase in the reserve for bad debts, and a $ favorable permanent
difference from the receipt of life insurance proceeds. At the end of the
year, the reserve for bad debts had a balance of $; the beginning
balance in the account was $ Hafnaoui's beginning book tax basis
in its fixed assets was $$ and its ending book tax
basis is $$
c Compute Hafnaoui Company's effective tax rate.
d Provide a reconciliation of Hafnaoui Company's effective tax rate with its
hypothetical tax rate of percent.
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