65. The Lagerstroemia Corporation was formed on January 1, 2014. Calculate the Lagerstroemia Corporation's taxable income or loss for 2014 given the following information:
Gross receipts$255,000
Cost of goods sold$150,000
Dividend income (from 10 percent-owned domestic corporation)$ 35,000
Interest income$ 10,000
Business expenses (other than organizational costs and charitable contributions)$120,000
Charitable contributions$ 5,000
Organizational costs expensed$ 5,000
Taxable income/(loss)$
ANSWER: Gross receipts$ 255,000
Cost of goods sold(150,000)
Gross profit$ 105,000
Dividend income35,000
Interest income 10,000
Total income
?$ 150,000
Business expenses$(120,000)
Organizational costs (5,000)
Income before charitable contribution deduction$ 25,000
Charitable contribution deduction (10% × $25,000) (2,500)
Income before dividends received deduction$ 22,500
Dividends received deduction (70% × $35,000 = $24,500)
? (24,500)
Taxable income/(loss)$ (2,000)
POINTS: 1
QUESTION TYPE: Subjective Short Answer
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-03 - LO:11-03
66. The Peach Corporation is a regular corporation that contributes $25,000 cash to qualified charitable organizations during 2014. The corporation has net taxable income of $190,000 before deducting the contributions.
a.
?What is the amount of Peach Corporation's allowable deduction for charitable contributions for the current year?
b.What may the corporation do with any excess amount of contributions?
ANSWER: a.$19,000 = 10% × $190,000.
b.
?The excess may be carried forward to the 5 succeeding tax years, again subject to the 10 percent limitation.
POINTS: 1
QUESTION TYPE: Subjective Short Answer
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-03 - LO:11-03
67. The Guava Corporation has book net income of $90,000 for 2014. Included in this figure are the following items which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.
1.Federal income tax expense$24,000
2.Depreciation deducted on books, not deductible for tax purposes$ 4,000
3.Deduction for 50 percent of meals and entertainment expense not allowed for tax purposes $ 3,000
4.Deduction for payroll tax penalties not allowed for tax purposes$ 2,000
5.Tax exempt interest income included in book income but not in tax return income$12,000
Based on the above information, calculate the Guava Corporation's taxable income for the year. Show your calculations.
ANSWER: $111,000 = $90,000 + $24,000 + $4,000 + $3,000 + $2,000 - $12,000
POINTS: 1
QUESTION TYPE: Subjective Short Answer
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-04 - LO:11-04
68. The Cat Corporation had $20,000 of book income in the current year. The following is a list of differences between federal and book income and expenses:
Federal income tax expense deducted for books $ 4,400
Depreciation deducted on books $ 3,000
Depreciation deducted on tax return $14,000
50 percent of meals expense not allowed as an expense for taxes $ 2,000
Charitable contributions carried over from prior years and deducted on the current year tax return $ 2,300
Current year taxable gain on an installment sale which was reported on the books in a previous year $ 5,000
Prepaid interest not deductible in the current year for tax purposes but claimed as a deduction for book income purposes $10,000
Nondeductible club dues $ 1,000
Based on the above information, calculate the Cat Corporation’s federal taxable income for the year. Show your calculations.
ANSWER: $29,100 = $20,000 + $4,400 + $3,000 - $14,000 + $2,000 - $2,300 + $5,000 + $10,000 + $1,000
POINTS: 1
QUESTION TYPE: Subjective Short Answer
HAS VARIABLES: False
LEARNING OBJECTIVES: ITF.WABG.15.LO:11-04 - LO:11-04
