Rainbow Company reported pre-tax net income from continuing operations of $800,000 and taxable income of $510,000. The book-tax difference of $290,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $70,000 due to an increase in the reserve for bad debts, and a $160,000 favorable permanent difference from the receipt of life insurance proceeds. Rainbow Company's applicable tax rate is 21%. Compute Rainbow Company's current income tax expense. Compute Rainbow Company's effective tax rate.
Cancun Corporation reported pre-tax book income of $11,000,000. During the current year, the reserve for bad debts increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Cancun Corporation sold a fixed asset and reported a book gain of $50,000 and a tax gain of $75,000. Finally, the company received $250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Assuming a tax rate of 21%, compute the company's current income tax expense or benefit.
