Supra, Inc., estimates total federal and state tax rates to

Supra, Inc., estimates total federal and state tax rates to be 40 percent. Expected annual pretax earnings from continuing operations are $1,200,000. Differences between tax income and financial statement income are expected to be the following:
Dividend exclusion for dividends received on the company’s
stock investments ..................... $70,000
Tax-exempt income received................ 20,000
Premiums for life insurance on officers for which the company
is the beneficiary.................... 12,000

A business tax credit of $40,000 should be available. Supra’s first-quarter pretax earnings is $170,000, which includes an extraordinary loss of $30,000 before any tax effect of the extraordinary loss.

Required
a. Estimate Supra’s effective combined federal and state tax rate on income from continuing operations for the year.
b. Prepare the entry to record the tax provision for the income from continuing operations for the first quarter.

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