Question:XYZ Company reports income tax expense of $224,000 on its Income Statement for the year ending December 31 Year 4. Included in Year 4's income is interest revenue of $40,000 from some tax-exempt municipal bonds that the company owns. In computing its income tax expense of $224,000, the company also had a temporary difference of $80,000, which will result in a future tax deduction. It is assumed that a tax rate of 30 percent will apply to the future tax deduction. The tax rate for Year 4 (the company's first year of operations) is 40 percent. Given the above information, what is XYZ's effective tax rate for Year 4?
A $224,000/$580,000 = .386
B $224,000/$660,000 = .339
C $224,000/$620,000 = .361
D None of these
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