Compute the income tax provision for Motown Memories Inc. (MM) as of December 31, 2019. The company’s income statement for 2019 is provided below: Motown Memories Inc. Statement of Operations at December 31, 2019

Net sales $ 50,000,000

Cost of sales 28,000,000

Gross profit $ 22,000,000

Compensation $ 2,000,000

Selling expenses 1,500,000

Depreciation and amortization 4,000,000

Other expenses 500,000

Total operating expenses $ 8,000,000

Income from operations $ 14,000,000

Interest and other income 1,000,000

Income before income taxes $ 15,000,000

_You identified the following permanent differences:

Interest income from municipal bonds $ 50,000

Nondeductible meals $ 20,000

Nondeductible fines $ 5,000

prepared the following schedule of temporary differences from the beginning of the year to the end of the year: Motown Memories Inc. Temporary Difference Scheduling Template Taxable Temporary Differences Beginning Deferred Taxes Current Year Change EOY Cumulative T/D EOY

Deferred Taxes Accumulated depreciation $(1,680,000) $(1,000,000) $(9,000,000) $(1,890,000)

Deductible Temporary Differences BOY Deferred Taxes Current Year Change EOY Cumulative T/D EOY Deferred Taxes Allowance for bad debts $42,000 $50,000 $250,000 $52,500

Reserve for warranties 21,000 20,000 120,000 25,200

Inventory §263A adjustment 50,400 60,000 300,000 63,000

Deferred compensation 10,500 10,000 60,000 12,600

Accrued pension liabilities 630,000 250,000 3,250,000 682,500

Total $753,900 $390,000 $3,980,000 $835,800

The income tax provision for Motown Memories Inc (MM) as of December 31, 2019.
Part (A): Current Income Tax Expense or Benefit for 2019
		Amount
Income before income taxes	$	15,000,000
Interest from municipal bonds	$	-50,000
Non-deductible meals and entertainment expense (M&E)	$	20,000
Non-deductible fines	$	5,000
Book equivalent of taxable income	$	14,975,000
Net change in cumulative (Favourable) Temporary Differences (TTD)	$	-1,000,000
Net change in cumulative (Favourable) Temporary Differences (TTD)	$	610,000
Taxable income	$	14,365,000
X 21%	$	0.21
	$	3,016,650
Current tax expense	$	3,016,650

Required:

A. Compute MM’s current income tax expense or benefit for 2019.

B. Compute MM's deferred income tax expense or benefit for 2019.

C. Prepare a reconciliation of MM’s total income tax provision with its hypothetical income tax expense of 21% in both dollars and rates.

Answer rating: 100% (QA)

a To get the current tax expense a series of calculations are done The calculations start with the i... View the full answer