Croyden is a calendar year, accrual basis corporation. Mr. and Mrs. Croyden (cash basis taxpayers) are the sole corporate shareholders. Mr. Croyden is president of the corporation, and Mrs. Croyden is vice president. Croyden’s financial records, prepared in accordance with GAAP, show the following information for the year: Use Table 7-1 and Table 7-2 Revenues from sales of goods $ 12,900,000 Cost of goods sold (LIFO) (9,260,000) Gross profit $ 3,640,000 Bad debt expense $ 24,000 Administrative salaries and wages 612,000 State and local business taxes 135,000 Interest expense 33,900 Advertising 67,000 Annual property insurance premiums 19,800 Annual life insurance premiums 7,300 Depreciation expense 148,800 Repairs, maintenance, utilities 81,000 Croyden’s records reveal the following facts: Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes. Because of the UNICAP rules, Croyden’s cost of goods sold for tax purposes exceeds the cost of goods sold for financial statement purposes by $219,000. Bad debt expense equals the addition to the corporation’s allowance for bad debts. Actual write-offs of uncollectible accounts during the year totaled $31,200. Administrative salaries include an accrued $50,000 year-end bonus to Mr. Croyden and an accrued $20,000 year-end bonus to Mrs. Croyden. These bonuses were paid on January 17 of the following year. The life insurance premiums were on key-person policies for Mr. and Mrs. Croyden. The corporation is the policy beneficiary. Croyden disposed of two assets during the year. (These dispositions are not reflected in the financial statement information shown.) It sold office furnishings for $45,000. The original cost of the furnishings was $40,000, and accumulated MACRS depreciation through date of sale was $12,700. It also exchanged transportation equipment for a 15 percent interest in a partnership. The original cost of the transportation equipment was $110,000, and accumulated MACRS depreciation through date of exchange was $38,900. MACRS depreciation for assets placed in service in prior years (including the office furnishings and transportation equipment disposed of this year) is $187,600. The only asset acquired this year was new equipment costing $275,000. The equipment has a seven-year recovery period and was placed in service on February 11. Assume that Croyden does not elect Section 179 or bonus depreciation with respect to this acquisition. Croyden’s prior-year tax returns show no nonrecaptured Section 1231 losses and a $7,400 capital loss carryforward. Required: Solely on the basis of these facts, compute Croyden’s taxable income. Note: Round your intermediate computations to the nearest whole dollar amount.

Croyden is a calendar year, accrual basis corporation. Mr. and Mrs. Croyden (cash basis taxpayers) are the sole corporate shareholders. Mr. Croyden is president of the corporation, and Mrs. Croyden is vice president. Croyden’s financial records, prepared in accordance with GAAP, show the following information for the year: Use Table 7-1 and Table 7-2 Revenues from sales of goods $ 12,900,000 Cost of goods sold (LIFO) (9,260,000) Gross profit $ 3,640,000 Bad debt expense $ 24,000 Administrative salaries and wages 612,000 State and local business taxes 135,000 Interest expense 33,900 Advertising 67,000 Annual property insurance premiums 19,800 Annual life insurance premiums 7,300 Depreciation expense 148,800 Repairs, maintenance, utilities 81,000 Croyden’s records reveal the following facts: Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes. Because of the UNICAP rules, Croyden’s cost of goods sold for tax purposes exceeds the cost of goods sold for financial statement purposes by $219,000. Bad debt expense equals the addition to the corporation’s allowance for bad debts. Actual write-offs of uncollectible accounts during the year totaled $31,200. Administrative salaries include an accrued $50,000 year-end bonus to Mr. Croyden and an accrued $20,000 year-end bonus to Mrs. Croyden. These bonuses were paid on January 17 of the following year. The life insurance premiums were on key-person policies for Mr. and Mrs. Croyden. The corporation is the policy beneficiary. Croyden disposed of two assets during the year. (These dispositions are not reflected in the financial statement information shown.) It sold office furnishings for $45,000. The original cost of the furnishings was $40,000, and accumulated MACRS depreciation through date of sale was $12,700. It also exchanged transportation equipment for a 15 percent interest in a partnership. The original cost of the transportation equipment was $110,000, and accumulated MACRS depreciation through date of exchange was $38,900. MACRS depreciation for assets placed in service in prior years (including the office furnishings and transportation equipment disposed of this year) is $187,600. The only asset acquired this year was new equipment costing $275,000. The equipment has a seven-year recovery period and was placed in service on February 11. Assume that Croyden does not elect Section 179 or bonus depreciation with respect to this acquisition. Croyden’s prior-year tax returns show no nonrecaptured Section 1231 losses and a $7,400 capital loss carryforward. Required: Solely on the basis of these facts, compute Croyden’s taxable income. Note: Round your intermediate computations to the nearest whole dollar amount.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Revenues from sales of goods	$ 12,900,000
Cost of goods sold (LIFO)	(9,260,000)
Gross profit	$ 3,640,000
Bad debt expense	$ 24,000
Administrative salaries and wages	612,000
State and local business taxes	135,000
Interest expense	33,900
Advertising	67,000
Annual property insurance premiums	19,800
Annual life insurance premiums	7,300
Depreciation expense	148,800
Repairs, maintenance, utilities	81,000

Croyden’s records reveal the following facts:

Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes.
Because of the UNICAP rules, Croyden’s cost of goods sold for tax purposes exceeds the cost of goods sold for financial statement purposes by $219,000.
Bad debt expense equals the addition to the corporation’s allowance for bad debts. Actual write-offs of uncollectible accounts during the year totaled $31,200.
Administrative salaries include an accrued $50,000 year-end bonus to Mr. Croyden and an accrued $20,000 year-end bonus to Mrs. Croyden. These bonuses were paid on January 17 of the following year.
The life insurance premiums were on key-person policies for Mr. and Mrs. Croyden. The corporation is the policy beneficiary.
Croyden disposed of two assets during the year. (These dispositions are not reflected in the financial statement information shown.) It sold office furnishings for $45,000. The original cost of the furnishings was $40,000, and accumulated MACRS depreciation through date of sale was $12,700. It also exchanged transportation equipment for a 15 percent interest in a partnership. The original cost of the transportation equipment was $110,000, and accumulated MACRS depreciation through date of exchange was $38,900.
MACRS depreciation for assets placed in service in prior years (including the office furnishings and transportation equipment disposed of this year) is $187,600. The only asset acquired this year was new equipment costing $275,000. The equipment has a seven-year recovery period and was placed in service on February 11. Assume that Croyden does not elect Section 179 or bonus depreciation with respect to this acquisition.
Croyden’s prior-year tax returns show no nonrecaptured Section 1231 losses and a $7,400 capital loss carryforward.

Required:

Solely on the basis of these facts, compute Croyden’s taxable income.

Note: Round your intermediate computations to the nearest whole dollar amount.

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