Squirrel, Inc., an accrual basis, calendar year C corporation reports the following results for 2022. Income Gross profits on sales Dividend income Interest on US Treasury bonds Interest on Texas Education bonds Life insurance policy payout Gain on sale of investment land Expenses Bad debt expense Depreciation (book) Charitable contributions Loss on sale of stock Penalty for pollution Federal income tax expense Net income reported on fin statements Acq Description 1/2022 Used Office Machinery $1,072,000 - 1,000,000 72,000 IRC Section 179 Depr. Basis 6/2021 Used Furniture 2/2022 Used Heavy Trucks 2/2018 Light Trucks Other information: a. Regular tax depreciation (MACRS). Assume Squirrel uses Straight-Line for the ADS calculation. Cost Sub + Charitable Limit ($18, 609) 200,000 336,093 50,000 Book income + Nondeductible Federal Income Tax Expense + Nondeductible Penalty - Nontaxable Municipal interest income - Life insurance proceeds - Tax depreciation in excess of book - Charitable Carryfoward Sub $1,260,000 -DRD -NOL Taxable Income 40,000 (10% owned domestic corp) 20,000 24,000 100,000 (key employee died) 16,000 10,000 331,619 16,000 2,400 900 230,807 $868,274 GDS / ADS Recovery 5 yr/ 6 yr b. Squirrel has an NOL carryforward from prior years of $80,000. c. Squirrel has a contribution carryforward from prior years of $1,000. d. 2022 writeoffs for bad debts equaled the accrual of bad debt expense. e. During 2022, Squirrel made quarterly estimated payments of $25,000 per quarter toward the 2022 corporate federal income tax liability. f. Squirrel's taxable income is calculated using the reconciliation approach as follows: 7 yr/ 10 yr 5 yr/ 6 yr 5 yr/ 5 yr TOTAL 2022 Depreciation 1,000,000 14,400 48,980 64,530 9,600 1,137,510 868,274 230,807 900 (24,000) (100,000) (805,891) 170,090 (1,000) 163,090 (20,000) (80,000) 69,090 REQUIRED: Determine earnings & profits for Squirrel for the year 2022.
Squirrel, Inc., an accrual basis, calendar year C corporation reports the following results for 2022. Income Gross profits on sales Dividend income Interest on US Treasury bonds Interest on Texas Education bonds Life insurance policy payout Gain on sale of investment land Expenses Bad debt expense Depreciation (book) Charitable contributions Loss on sale of stock Penalty for pollution Federal income tax expense Net income reported on fin statements Acq Description 1/2022 Used Office Machinery $1,072,000 - 1,000,000 72,000 IRC Section 179 Depr. Basis 6/2021 Used Furniture 2/2022 Used Heavy Trucks 2/2018 Light Trucks Other information: a. Regular tax depreciation (MACRS). Assume Squirrel uses Straight-Line for the ADS calculation. Cost Sub + Charitable Limit ($18, 609) 200,000 336,093 50,000 Book income + Nondeductible Federal Income Tax Expense + Nondeductible Penalty - Nontaxable Municipal interest income - Life insurance proceeds - Tax depreciation in excess of book - Charitable Carryfoward Sub $1,260,000 -DRD -NOL Taxable Income 40,000 (10% owned domestic corp) 20,000 24,000 100,000 (key employee died) 16,000 10,000 331,619 16,000 2,400 900 230,807 $868,274 GDS / ADS Recovery 5 yr/ 6 yr b. Squirrel has an NOL carryforward from prior years of $80,000. c. Squirrel has a contribution carryforward from prior years of $1,000. d. 2022 writeoffs for bad debts equaled the accrual of bad debt expense. e. During 2022, Squirrel made quarterly estimated payments of $25,000 per quarter toward the 2022 corporate federal income tax liability. f. Squirrel's taxable income is calculated using the reconciliation approach as follows: 7 yr/ 10 yr 5 yr/ 6 yr 5 yr/ 5 yr TOTAL 2022 Depreciation 1,000,000 14,400 48,980 64,530 9,600 1,137,510 868,274 230,807 900 (24,000) (100,000) (805,891) 170,090 (1,000) 163,090 (20,000) (80,000) 69,090 REQUIRED: Determine earnings & profits for Squirrel for the year 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Squirrel, Inc., an accrual basis, calendar year C corporation reports the
following results for 2022.
Income
Gross profits on sales
Dividend income
Interest on US Treasury bonds
Interest on Texas Education bonds
Life insurance policy payout
Gain on sale of investment land
Expenses
Bad debt expense
Depreciation (book)
Charitable contributions
Loss on sale of stock
Penalty for pollution
Federal income tax expense
Net income reported on fin statements
Acq
Description
1/2022 Used Office Machinery $1,072,000
- 1,000,000
72,000
IRC Section 179
Depr. Basis
6/2021 Used Furniture
2/2022 Used Heavy Trucks
2/2018 Light Trucks
Other information:
a. Regular tax depreciation (MACRS). Assume Squirrel uses Straight-Line for the ADS
calculation.
Cost
Sub
+ Charitable Limit ($18, 609)
200,000
336,093
50,000
Book income
+ Nondeductible Federal Income Tax Expense
+ Nondeductible Penalty
- Nontaxable Municipal interest income
- Life insurance proceeds
- Tax depreciation in excess of book
- Charitable Carryfoward
Sub
$1,260,000
-DRD
-NOL
Taxable Income
40,000 (10% owned domestic corp)
20,000
24,000
100,000 (key employee died)
16,000
10,000
331,619
16,000
2,400
900
230,807
$868,274
GDS / ADS
Recovery
5 yr/ 6 yr
b. Squirrel has an NOL carryforward from prior years of $80,000.
c. Squirrel has a contribution carryforward from prior years of $1,000.
d. 2022 writeoffs for bad debts equaled the accrual of bad debt expense.
e. During 2022, Squirrel made quarterly estimated payments of $25,000 per quarter
toward the 2022 corporate federal income tax liability.
f. Squirrel's taxable income is calculated using the reconciliation approach as
follows:
7 yr/ 10 yr
5 yr/ 6 yr
5 yr/ 5 yr
TOTAL
2022 Depreciation
1,000,000
14,400
48,980
64,530
9,600
1,137,510
868,274
230,807
900
(24,000)
(100,000)
(805,891)
170,090
(1,000)
163,090
(20,000)
(80,000)
69,090
REQUIRED: Determine earnings & profits for Squirrel for the year 2022.
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