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4 November, 09:33

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

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  1. 4 November, 09:48
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    462,000 taxable income

    38,000 deferred tax benefit

    Explanation:

    500,000

    +5,000 reverse bad debt

    -40,000 tax dep > book dep

    -3,000

    462,000 taxable income
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