Problem 4

You report pretax income of $100,000 and taxable income of $60,000 for 2017.

The difference between the two is attributable to non-U.S. income earned by non-U.S. subsidiaries operating in countries that do not tax corporate earnings.

You maintain that the income earned by non U.S. subsidiaries will be permanently reinvested outside the U.S. and, as such, you do not report any DTLs in relation to it.

Your current and expected future tax rate is 35%.

1. What is the provision for tax will you report on your 2017 income statement, your current tax obligation in relation to 2017 operations, and your effective tax rate, then make a journal entry to record the total tax effect of operations in 2017, and prepare a reconciliation of standard to effective tax rate for 2017. Do the reconciliation in percentage and dollars.