You have been assigned to compute the income tax provision for Motown Memories Inc. (MM) as of December 31, 2015. The company's federal income tax rate is 34 percent. The company's income statement for 2015 is provided below:
Motown Memories Inc.
Statement of Operations at December 31, 2015
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:

Required:
a) Compute MM's current income tax expense or benefit for 2015.
b) Compute MM's deferred income tax expense or benefit for 2015.
c) Prepare a reconciliation of MM's total income tax provision with its hypothetical income tax expense in both dollars and rates.

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