XYZ is a calendar-year corporation that began business on January 1, 2024. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. XYZ corporation Income statement For current year Revenue from sales Cost of Goods Sold Gross profit Other income: Book Income $ 40,800,000 (27,540,000) $ 13,260,000 300,0001 23,2002 Income from investment in corporate stock Interest income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross Income Compensation Stock option compensation Advertising Repairs and Maintenance Rent expense Bad Debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes Expenses: (4,000) 3,000³ 50,000 $ 13,632,200 (7,508,000) 4 (208,000)5 (1,358,000) (79,000) (26,000) (45,000)6 (1,500,000)7 (78,000)8 (500,000)9 (36,800) (32,000)10 (42,500)11 (148,000) 12 $ (11,561,300) $ 2,070,900 (400,000) 13 $ 1,670,900 1XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, XYZ reports the actual dividend received as income, not the pro rata share of HC's earnings. 1XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, XYZ reports the actual dividend received as income, not the pro rata share of HC's earnings. 2 of the $23,200 interest income, $5,800 was from a City of Seattle bond, $7,800 was from a Tacoma City bond, $6,800 was from a fully taxable corporate bond, and the remaining $2,800 was from a money market account. 3This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as §1231 gain). 4This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5 This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6XYZ actually wrote off $29,000 of its accounts receivable as uncollectible. 7Tax depreciation was $2,000,000. 8 In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9XYZ made $500,000 of cash contributions to charities during the year 10 On July 1 of this year, XYZ acquired the assets of another business. In the process, it acquired $312,000 of goodwill. At the end of the year, XYZ wrote off $32,000 of the goodwill as impaired. 11XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12The other expenses do not contain any items with book-tax differences. 13This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $360,000 ($90,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2023 and that in 2023 it reported a tax liability of $500,000. During 2024, XYZ determined its taxable income at the end of each of the first three quarters as follows: Quarter-end Cumulative taxable income (loss) $ 420,000 $ 1,120,000 First Second Third $ 1,495,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount.

XYZ is a calendar-year corporation that began business on January 1, 2024. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. XYZ corporation Income statement For current year Revenue from sales Cost of Goods Sold Gross profit Other income: Book Income $ 40,800,000 (27,540,000) $ 13,260,000 300,0001 23,2002 Income from investment in corporate stock Interest income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross Income Compensation Stock option compensation Advertising Repairs and Maintenance Rent expense Bad Debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes Expenses: (4,000) 3,000³ 50,000 $ 13,632,200 (7,508,000) 4 (208,000)5 (1,358,000) (79,000) (26,000) (45,000)6 (1,500,000)7 (78,000)8 (500,000)9 (36,800) (32,000)10 (42,500)11 (148,000) 12 $ (11,561,300) $ 2,070,900 (400,000) 13 $ 1,670,900 1XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, XYZ reports the actual dividend received as income, not the pro rata share of HC's earnings. 1XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, XYZ reports the actual dividend received as income, not the pro rata share of HC's earnings. 2 of the $23,200 interest income, $5,800 was from a City of Seattle bond, $7,800 was from a Tacoma City bond, $6,800 was from a fully taxable corporate bond, and the remaining $2,800 was from a money market account. 3This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as §1231 gain). 4This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5 This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6XYZ actually wrote off $29,000 of its accounts receivable as uncollectible. 7Tax depreciation was $2,000,000. 8 In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9XYZ made $500,000 of cash contributions to charities during the year 10 On July 1 of this year, XYZ acquired the assets of another business. In the process, it acquired $312,000 of goodwill. At the end of the year, XYZ wrote off $32,000 of the goodwill as impaired. 11XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12The other expenses do not contain any items with book-tax differences. 13This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $360,000 ($90,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2023 and that in 2023 it reported a tax liability of $500,000. During 2024, XYZ determined its taxable income at the end of each of the first three quarters as follows: Quarter-end Cumulative taxable income (loss) $ 420,000 $ 1,120,000 First Second Third $ 1,495,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 47P

See similar textbooks