Starke corp an accrual basis, calendar year corporation, reported book income of $380,000. included in that amount was $50,000 municipal bond interest income.

$502,000

Explanation:

The computation of the total income is shown below:

= Book income + Interest expense on the debt incurred to carry the municipal bonds + federal income tax expense - municipal bond interest income

= $380,000 + $2,000 + $170,000 - $50,000

= $502,000

We simply added the interest expense on the debt and the deferral income tax expense and deduct the  municipal bond interest income to the book income so that the taxable income could find out.

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