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Social ScienceBaltimore inc reported pretax gaap income of $45,000 in 2020. The company determined it had deducted $5000 in nondeductible fines and added $2800 in tax exempt municipal interest revenue to Gaap income. Given a statutory tax rate of 25%, determine the taxable income, income tax payable, income tax expense, net income, and effective tax rate.
Baltimore inc reported pretax gaap income of $45,000 in 2020. The company determined it had deducted $5000 in nondeductible fines and added $2800 in tax exempt municipal interest revenue to Gaap income. Given a statutory tax rate of 25%, determine the taxable income, income tax payable, income tax expense, net income, and effective tax rate.
Expert Answer
The first step is to compute the taxable income of the business. For computing the taxable income, income whcih is exempted from tax and is included in net income computed shall be deducted from it and expenses which have been deducted from net income but which are nott allowed as deductible expenses shall be added back in net income, to know the taxable income.
Now, after computing the taxable income and tax rate is given, the next step is to compute the income tax expenses and income tax payable (both these are same amount). The amount of income tax expense and income tax payable is computed by applying the tax rate on taxable income f the business.
Net Income shall be computed by ddeducting the income t...
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