Question
Supra Inc. estimates total federal and state tax rates to be 40 percent. Expected annual pretax earnings from continuing operations are $1,300,000. Differences between tax
Supra Inc. estimates total federal and state tax rates to be 40 percent. Expected annual pretax earnings from continuing operations are $1,300,000. Differences between tax income and financial statement income are expected to be the following:
Dividend exclusion for dividends received on the companys stock investments: $78,000
Tax-exempt income received: $20,400
Premiums for life insurance on officers for which the company is the beneficiary: $13,800
A business tax credit of $40,100 should be available. Supras first-quarter pretax earnings is $188,000, which includes a loss from discontinued operations of $30,500 before any tax effect of that loss.
a. Estimate Supras effective combined federal and state tax rate on income from continuing operations for the year. (Round tax rate to whole percentage.)
b. Prepare the entry to record the tax provision for the income from continuing operations for the first quarter. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Use the tax rate calculated in part a.)
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