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You have been assigned to compute the income tax provision for Motown Memories Inc. (MM) as of December 31, 2014. The companys federal income tax

You have been assigned to compute the income tax provision for Motown Memories Inc. (MM) as of December 31, 2014. The companys federal income tax rate is 34 percent. The companys income statement for 2014 is provided below:

Motown Memories Inc.
Statement of Operations at December 31, 2014
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 identified the following permanent differences:

Interest income from municipal bonds: $ 50,000
Nondeductible meals and entertainment expenses: $ 20,000
Domestic production activities deduction: $ 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
Taxable Temporary Differences BOY Cumulative T/D Beginning Deferred Taxes (@ 34%) Current Year Change EOY Cumulative T/D Ending Deferred Taxes (@ 34%)
Noncurrent
Accumulated depreciation (8,000,000) (2,720,000) (1,000,000) (9,000,000) (3,060,000)

Deductible Temporary Differences BOY Cumulative T/D Beginning Deferred Taxes (@ 34%) Current Year Change EOY Cumulative T/D Ending Deferred Taxes (@ 34%)
Current
Allowance for bad debts 200,000 68,000 50,000 250,000 85,000
Reserve forwarranties 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
Noncurrent
Deferred compensation 50,000 17,000 10,000 60,000 20,400
Accrued pensionliabilities 3,000,000 1,020,000 250,000 3,250,000 1,105,000
Total noncurrent 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

Required:
a.

Compute MMs current income tax expense or benefit for 2014.

b.

Compute MMs deferred income tax expense or benefit for 2014.

c.

Prepare a reconciliation of MMs total income tax provision with its hypothetical income tax expense in both dollars and rates.(Amounts to be deducted should be indicated by a minus sign. Round your percentage answers to 2 decimal places.)

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