35. LO.2 Sparrow Corporation (a calendar year, accrual basis taxpayer) had the follow-ing transactions in 2020, its second year of operation:$330,00069,3005,0003,0003,500Taxable incomeFederal income tax liability paidTax-exempt interest incomeMeals expense (total)Premiums paid on key employee life insuranceIncrease in cash surrender value attributable to life insurance premiumsProceeds from key employee life insurance policyCash surrender value of life insurance policy at distributionExcess of capital losses over capital gains700130,00020,00013,000MACRS deduction26,00016,000Straight-line depreciation using ADS livesSection 179 expense elected during 2019Dividends received from domestic corporations (less than 20% owned)25,00035,000Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by$10,000 during 2020. In addition, Sparrow sold property on installment during 2019.The property was sold for $40,000 and had an adjusted basis at sale of $32,000. During2020, Sparrow received a $15,000 payment on the installment sale. Finally, assume thatno additional first-year depreciation was claimed. Compute Sparrow's current E & P.

Answer - Particulars Amount Taxable income $330,000 330000 Less :Federal income tax…

Sparrow Corporation (a calendar year, accrual basis taxpayer) had the follow ing transactions in 2020, its second year of operation: $330,000 69,300 5,000 3,000 3,500 700 130,000 20,000 13,000 26,000 16,000 Taxable income Federal income tax liability paid Tax-exempt interest income Meals expense (total) Premiums paid on key employee life insurance Increase in cash surrender value attributable to life insurance premiums Proceeds from key employee life insurance policy Cash surrender value of life insurance policy at distribution Excess of capital losses over capital gains MACRS deduction Straight-line depreciation using ADS lives Section 179 expense elected during 2019 Dividends received from domestic corporations (less than 20% owned) Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by 310,000 during 2020. In addition, Sparrow sold property on installment during 2019. The property was sold for $40,000 and had an adjusted basis at sale of $32,000. During 2020, Sparrow received a $15,000 payment on the installment sale. Finally, assumė that no additional first-year depreciation was claimed. Compute Sparrow's current E & P. 25,000 35,000

Sparrow Corporation (a calendar year, accrual basis taxpayer) had the follow ing transactions in 2020, its second year of operation: $330,000 69,300 5,000 3,000 3,500 700 130,000 20,000 13,000 26,000 16,000 Taxable income Federal income tax liability paid Tax-exempt interest income Meals expense (total) Premiums paid on key employee life insurance Increase in cash surrender value attributable to life insurance premiums Proceeds from key employee life insurance policy Cash surrender value of life insurance policy at distribution Excess of capital losses over capital gains MACRS deduction Straight-line depreciation using ADS lives Section 179 expense elected during 2019 Dividends received from domestic corporations (less than 20% owned) Sparrow uses the LIFO inventory method, and its LIFO recapture amount increased by 310,000 during 2020. In addition, Sparrow sold property on installment during 2019. The property was sold for $40,000 and had an adjusted basis at sale of $32,000. During 2020, Sparrow received a $15,000 payment on the installment sale. Finally, assumė that no additional first-year depreciation was claimed. Compute Sparrow's current E & P. 25,000 35,000

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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