Answer:
$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.
