SEP, a calendar year corporation, reported $918,000 net income before tax on its current year financial statements prepared inaccordance with GAAP. The corporation's records reveal the following information:• SEP incurred $75,000 of domestic research costs that resulted in a new 17-year patent for the corporation. SEP expensed thesecosts for book purposes.• SEP's depreciation expense per books was $98,222, and its MACRS depreciation deduction was $120,000.• SEP was organized two years ago. For its first taxable year, it capitalized $27,480 start-up costs and elected to amortize them over180 months. For book purposes, it expensed the costs in the year incurred.Required:Compute SEP's taxable income.Note: Amounts to be deducted should be indicated with a minus sign. Do not round intermediate computations. Round finalanswers to the nearest whole dollar.Answer is complete but not entirely correct.Amount$ 918,000✔SEP's net book income before taxAdjustments:Research costsDepreciationAmortizationSEP's taxable income(75,000) X(21,778)✔(1,832) ✔$ 819,390 X

Taxable income: It implies to the income of the taxpayer on which the tax is charged or levied by…

Answered: SEP, a calendar year corporation,…

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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Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets: Asset Sales Price Cost Accumulated Depreciation Building $752,000 $749,000 $34,000 Sparkle Corporation stock 219,000 256,000 n/a Shimmer does not sell any other assets during the year, and its taxable income before these transactions is $847,000. What are Shimmer's taxable income and tax liability for the year? Taxable income: Tax Liability:
The following information applies to Pharoah Corporation, which reports under IFRS. 1. Prior to 2022, taxable income and accounting income were identical. 2 Accounting income was $1.7 million in 2022 and $1.41 million in 2023. 3. On January 1, 2022, equipment costing $1.59 million was purchased. It is being depreciated on a straight-line basis over eight years for financial reporting purposes, and is a Class 8-20% asset for tax purposes. 4. Tax-exempt interest income of $70,000 was received in 2023. 5. The tax rate is 30% for all periods. 6. Taxable income is expected in all future years. 7. Pharoah had 100,000 common shares outstanding throughout 2023. (a) Your answer is partially correct. Calculate the amount of capital cost allowance and depreciation expense for 2022 and 2023, and the corresponding carrying amount and undepreciated capital cost of the depreciable assets at the end of 2022 and 2023. 2022 2023 Capital Cost Allowance 159000 286200 +A Undepreciated Capital Cost 1431000…
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Grand Corporation reported pretax book income of $624, 000. Tax depreciation exceeded book depreciation by $416,000. In addition, the company received $312,000 of tax-exempt municipal bond interest. The company's prior - year tax return showed taxable income of $52,000. Grand's beginning book (tax) basis in its fixed assets was $2,040, 000 ($1,832, 000) and its ending book (tax) basis is $2, 540,000 ($1,924, 000). Compute the company's current income tax expense or benefit. Note: Leave no answer blank. Enter N/A or zero.
Lanco Corporation, an accrual-method corporation, reported taxable income of $2,020,000 this year. Included in the computation of taxable income were the following items: MACRS depreciation of $301,000. Depreciation for earnings and profits purposes is $193,000. A net capital loss carryover of $20,100 from last year. A net operating loss carryover of $26,500 from last year. $60,600 capital gain from the distribution of land to the company’s sole shareholder (see below). Not included in the computation of taxable income were the following items: Tax-exempt income of $5,300. Life insurance proceeds of $340,000. Excess current-year charitable contribution of $2,600 (to be carried over to next year). Tax-deferred gain of $27,700 on a like-kind exchange. Nondeductible life insurance premium of $2,900. Nondeductible interest expense of $2,100 on a loan used to buy tax-exempt bonds. Lanco's accumulated E&P at the beginning of the year was $2,870,000. During the year, Lanco made the…
Li Corporation reported pretax book income of $660,000. Tax depreciation exceeded book depreciation by $412, 000. Li's beginning book (tax) basis in its fixed assets was $1,960,000 ($1,748, 000) and its ending book (tax) basis is $1,860,000 ($1, 272, 000). In addition, the company received $360, 000 of tax-exempt municipal bond interest. The company's prior - year tax return showed taxable income of $49,000. Assuming a tax rate of 21 percent, compute the company's deferred income tax expense or benefit.
Mallow Incorporated, which has a 21% tax rate, purchased a new business asset. First-year book depreciation was $37,225, and first-year MACRS depreciation was $55,025. As a result of this book/tax difference, Mallow recorded a $3,738 deferred tax asset. True or False True False
TB MC Qu. 09-49 (Algo) George operates a business that generated... George operates a business that generated revenues of $58 million and allocable taxable income of $1.33 million. Included in the computation of allocable taxable income were deductible expenses of $244,000 of business interest and $254,000 of depreciation. What is the business interest limitation that George will be subject to this year if the business does not qualify under the gross income test? Multiple Choice O O $498,000 $472,200 $381,000 $322,800 $231,800
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In its first year, Firm KZ recognized $467,250 ordinary business income and a $15,850 loss on the sale of an investment asset. In its second year, Firm KZ recognized $530,000 ordinary business income, a $21,500 Section 1231 gain, and a $8,200 Section 1231 loss on two sales of operating assets. Required: a. Compute KZ's book and taxable income for its first year. b. Using a 21 percent tax rate, compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the year. c. Compute KZ's book and taxable income for its second year. d. Compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the second year. Complete this question by entering your answers in the tabs below. Req A and B Req C and D a. Compute KZ's book and taxable income for its first year. b. Using a 21 percent tax rate, compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the year. Note: Round…

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