The following information is provided for X Corporation for theyear 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 foreignsubsidiaries | 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 |
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X Corporation has not made an assertion under APB 23 that theirnon-U.S. undistributed earnings will be invested indefinitely orthat the earnings will be solely remitted in a tax-freeliquidation. The U.S. statutory rate is 21%. Based on all of theinformation presented, prepare an effective rate reconciliationshowing the dollar amount of each reconciling item (i.e. do notcombine potentially immaterial amounts) and the impact of eachreconciling item on the effective tax rate.
