Given the following facts:
Income before income taxes (on the income statement) $500,000
T Book depreciation (included in income before income taxes) $300,000
T Tax depreciation $450,000
T Bad debt expense (included in income before income taxes) $60,000
T Accounts receivable written off this year $75,000
T Product warranty expense (included in income before income taxes) $125,000
T Cost of warranty claims satisfied this year $90,000
T Rent income (included in income before income taxes) $60,000
T Rent collected this year $75,000
P State and local bond interest included in income before income taxes $35,000
P Domestic production activities deduction for this year $40,000
Enacted income tax rate 35%
1. Compute the company's taxable income. Hint: Temporary book-to-tax differences are indicated with a T while permanent book-to-tax differences are indicated with a P.
2. Compute the company's income tax payable.
3. Compute the company's income tax expense.