A firm's note to its financial statement reports income before income taxes for Year 4 of $70,000. It reports income tax expense of $26,245 for Year 4. In addition, the note reports the following amounts to facilitate reconciliation between the federal tax rate of 35 percent and the firm's average tax rate: state and local taxes of $775; tax-exempt income of $(610); patent amortization of $690; and restructuring charge of $890.
a. Compute the average tax rate for Year 4.
b. Prepare a schedule that reconciles the average tax rate to the statutory tax rate. Include in the chart the percentage that each of the reconciling items either increases or decreases the statutory rate when compared to the average tax rate.