In: Accounting
The following information is provided for X Corporation for the year ending December 31, 2018:
Book earnings before income taxes |
$6,000 |
Tax exempt interest income |
600 |
Taxes on foreign income above the U.S. statutory rate |
200 |
State income taxes (before Federal benefit) |
500 |
Annual increase in warranty reserve |
200 |
Dividend received deduction on dividends from foreign subsidiaries |
600 |
Foreign tax credits available after the TCJA |
400 |
Tax over book depreciation for 2018 |
500 |
Current year increase in valuation allowance |
1,000 |
Entertainment expenses |
400 |
Foreign derived intangible income (FDII) special deduction |
600 |
X Corporation has not made an assertion under APB 23 that their non-U.S. undistributed earnings will be invested indefinitely or that the earnings will be solely remitted in a tax-free liquidation. The U.S. statutory rate is 21%. Based on all of the information presented, prepare an effective rate reconciliation showing the dollar amount of each reconciling item (i.e. do not combine potentially immaterial amounts) and the impact of each reconciling item on the effective tax rate.
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