14 eBook References Problem 06-17 (Algo) [LO 6-7, 6-9] EFG, an accrual basis, calendar year corporation, reported $715,000 net income before tax on its financial statements prepared in accordance with GAAP EFG's records reveal the following information: The allowance for bad debts as of January 1 was $80,000. Write-offs for the year totaled $21,250, and the addition to the allowance for the year was $19,700. The allowance as of December 31 was $78,450. EFG paid a $25,025 fine to the state of Delaware for a violation of state pollution control laws. EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG's lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $71,500 allowance for contingent legal liability and reporting a $71,500 accrued expense on the income statement. EFG received a $235.950 advanced payment for 10,000 units of inventory on October 20, EFG reported the payment as revenue the following February when the units were shipped. Required: Compute EFG's taxable income. Note: Amounts to be deducted should be indicated with a minus sign. EFG's net book income before tax Bad debt Fines Contingent liability Advanced payment for inventory EFG's taxable income Amount $
14 eBook References Problem 06-17 (Algo) [LO 6-7, 6-9] EFG, an accrual basis, calendar year corporation, reported $715,000 net income before tax on its financial statements prepared in accordance with GAAP EFG's records reveal the following information: The allowance for bad debts as of January 1 was $80,000. Write-offs for the year totaled $21,250, and the addition to the allowance for the year was $19,700. The allowance as of December 31 was $78,450. EFG paid a $25,025 fine to the state of Delaware for a violation of state pollution control laws. EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG's lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $71,500 allowance for contingent legal liability and reporting a $71,500 accrued expense on the income statement. EFG received a $235.950 advanced payment for 10,000 units of inventory on October 20, EFG reported the payment as revenue the following February when the units were shipped. Required: Compute EFG's taxable income. Note: Amounts to be deducted should be indicated with a minus sign. EFG's net book income before tax Bad debt Fines Contingent liability Advanced payment for inventory EFG's taxable income Amount $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 06-17 (Algo) [LO 6-7, 6-9)
EFG, an accrual basis, calendar year corporation, reported $715,000 net income before tax on its financial statements prepared in
accordance with GAAP. EFG's records reveal the following information:
•The allowance for bad debts as of January 1 was $80,000. Write-offs for the year totaled $21,250, and the addition to the allowance
for the year was $19,700. The allowance as of December 31 was $78,450.
. EFG paid a $25,025 fine to the state of Delaware for a violation of state pollution control laws.
• EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG's lawyers are convinced that the suit
is frivolous, its independent auditors insisted on establishing a $71,500 allowance for contingent legal liability and reporting a
$71,500 accrued expense on the income statement.
• EFG received a $235,950 advanced payment for 10,000 units of inventory on October 20. EFG reported the payment as revenue
the following February when the units were shipped.
Required:
Compute EFG's taxable income.
Note: Amounts to be deducted should be indicated with a minus sign.
EFG's net book income before tax
Bad debt
Fines
Contingent liability
Advanced payment for inventory
EFG's taxable income
Amount
$
0
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