Question :
Oriole Company reported pretax total income from continuing operations of $1,000,000 and taxable income of $1,200,000. The unfavorable book-tax difference of $200,000 was because of a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $300,000 because of an increase in the reserve for bad debts, and a $100,000 unfavorable permanent difference from the disallowance of compensation expense related to the exercise of incentive stock options. Oriole Company's applicable tax rate is 34 percent.
a. Evaluate Oriole Company's current income tax expense.
b. Evaluate Oriole Company's deferred income tax expense or benefit.
c. Determine Oriole Company's effective tax rate
d. Give a reconciliation of Oriole Company's effective tax rate with its hypothetical tax rate of 34 percent.