You have been assigned to compute the income tax provision for Motown Memories, Inc. (MM) as of December 31, 2016. The Companys federal income tax rate is 34%. The Companys Income Statement for 2016 is provided below:

Motown Memories, Inc. Statement of Operations at December 31, 2016 Net sales $50,000,000 Cost of sales 28,000,000 Gross profit 22,000,000 Compensation 2,000,000 Selling expenses 1,500,000 Depreciation and amortization 4,000,000 Other expenses 500,000 Total operating expenses 8,000,000 Income from operations $14,000,000 Interest and other income 1,000,000 Income before income taxes $15,000,000

You have identified the following permanent differences:

Interest income from municipal bonds: $50,000

Nondeductible meals and entertainment expenses: $20,000

Domestic production activities deduction (DPAD): $250,000

Nondeductible fines: $5,000

MM prepared the following schedule of temporary differences from the beginning of the year to the end of the year:

Motown Memories, Inc.
Temporary Difference Scheduling Template
		BOY	Beginning	Current	EOY	Ending
Taxable (Favorable)		Cumulative	Deferred	Year	Cumulative	Deferred
Temporary Differences		T/D	Taxes (@ 34%)	Change	T/D	Taxes (@ 34%)
Non-current
Accumulated depreciation		(8,000,000)	(2,720,000)	(1,000,000)	(9,000,000)	(3,060,000)

		BOY	Beginning	Current	EOY	Ending
Deductible (Unfavorable)		Cumulative	Deferred	Year	Cumulative	Deferred
Temporary Differences		T/D	Taxes (@ 34%)	Change	T/D	Taxes (@ 34%)
Current
Allowance for bad debts		200,000	68,000	50,000	250,000	85,000
Reserve for warranties		100,000	34,000	20,000	120,000	40,800
Inventory 263A adjustment		240,000	81,600	60,000	300,000	102,000
Total current		540,000	183,600	130,000	670,000	227,800
Non-Current
Deferred compensation		50,000	17,000	10,000	60,000	20,400
Accrued pension liabilities		3,000,000	1,020,000	250,000	3,250,000	1,105,000
Total non-current		3,050,000	1,037,000	260,000	3,310,000	1,125,400
Total		3,590,000	1,220,600	390,000	3,980,000	1,353,200

a. Compute MMs current income tax expense or benefit for 2016.

b. Compute MMs deferred income tax expense or benefit for 2016.

c. Prepare a reconciliation of MMs total income tax provision with its hypothetical income tax expense in both dollars and rates.