Required
1. Calculate the Current Tax Expense for 20X8
2. Determine the impact of prior year 20X7 return-to-provisionadjustments on current year tax expense
3. Please note the 20X7 tax return is filed during 20X8 and the20X7 return to provision (RTP) adjustments are included with the20X8 tax provision calculation
4. Calculate the total current tax expense for 20X8
5. Prepare the roll forward of deferred tax balances at 31December 20X8 and calculate deferred tax expense
6. Calculate total tax expense and the effective tax rate.Prepare the effective tax rate reconciliation
7. Determine what journal entries TNB would have made to recordthe 20X8 tax provision.
Trust National Bank (TNB) is a national bank operating in State A.The Bank offers a full range of banking services to its customers. It was organized and commenced operations on 1 January 20X7, and is a calendar year company for both book and tax purposes 20X8 Facts & Assumptions The enacted federal statutory rate is 35% State A does not assess a corporate income tax; therefore, no state and loca income taxes need to be accrued or paid TNB’s pre-tax income is $1 million The client has identified the following book/tax differences o Pre-tax income includes $80,000 of non-taxable interest income earned on municipal bonds o The Bank has accrued $120,000 for a legal reserve. None ofthis amount is currently deductible fortax purposes o The tax depreciation report indicates tax depreciation is $80,000 greaterthan book depreciation expense Book depreciation for 20X8 is $300,000, and tax depreciation is $380,000 The original cost of fixed assets (all acquired January 1, 20X7) before depreciation is $1,800,000 Tax depreciation expenses perthe 20X7 tax return was $480,000 o Tax regulations allow deduction for only 50% of the $40,000 in meals and entertainment book expenses o Book expense of $250,000 was recorded increases th e loan loss reserve. None ofthis amount is currently deductible for tax purposes Show transcribed image text Trust National Bank (TNB) is a national bank operating in State A.The Bank offers a full range of banking services to its customers. It was organized and commenced operations on 1 January 20X7, and is a calendar year company for both book and tax purposes 20X8 Facts & Assumptions The enacted federal statutory rate is 35% State A does not assess a corporate income tax; therefore, no state and loca income taxes need to be accrued or paid TNB’s pre-tax income is $1 million The client has identified the following book/tax differences o Pre-tax income includes $80,000 of non-taxable interest income earned on municipal bonds o The Bank has accrued $120,000 for a legal reserve. None ofthis amount is currently deductible fortax purposes o The tax depreciation report indicates tax depreciation is $80,000 greaterthan book depreciation expense Book depreciation for 20X8 is $300,000, and tax depreciation is $380,000 The original cost of fixed assets (all acquired January 1, 20X7) before depreciation is $1,800,000 Tax depreciation expenses perthe 20X7 tax return was $480,000 o Tax regulations allow deduction for only 50% of the $40,000 in meals and entertainment book expenses o Book expense of $250,000 was recorded increases th e loan loss reserve. None ofthis amount is currently deductible for tax purposes
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