Cardinal Corporation Reported Pretax Book Income of $3,000,000

question 63

Short Answer

Cardinal Corporation reported pretax book income of $3,000,000.During the current year,the reserve for bad debts increased by $200,000.In addition,book depreciation exceeded tax depreciation by $100,000.Cardinal sold a fixed asset and reported a book gain of $60,000 and a tax gain of $80,000.Finally,Cardinal deducted $50,000 of domestic production activities deduction on its tax return.Using a tax rate of 34%,compute Cardinal's current income tax expense or benefit.

---

Definitions:

Account Nature

The characteristic of an account that classifies it as an asset, liability, equity, revenue, or expense.

Periodic Inventory Method

An accounting method where inventory and cost of goods sold are calculated at set intervals, such as yearly or quarterly.

Promissory Note

A formal written promise by a borrower to pay a certain sum at a fixed future date.

Notes Payable

Short-term or long-term liabilities recorded when a company borrows money, often in the form of a formal written agreement to pay a specified amount with interest.