Willingham, Inc., an accrual basis C corporation, reports pretax book income of $1.6 million. At the beginning of the tax year, Willingham reported no deferred tax accounts on its balance sheet. It is subject to a 35% U.S. income tax rate in the current year and for the foreseeable future.
Willingham’s book-tax differences include the following. Compute the entity’s current and deferred income tax expense for the year.
Addition to the book reserve for uncollectible receivables (no specific
write-offs occurred) ...................... $4,000,000
Tax depreciation in excess of book ............... 3,000,000
Book gain from installment sale of nonbusiness asset, deferred for tax.. 2,000,000
Interest income from school district bonds ............ 200,000