For the current year, ABC corporation has gross profit rom sales of 3,265,130. I
ID: 2560411 • Letter: F
Question
For the current year, ABC corporation has gross profit rom sales of 3,265,130. It also have the following investment: US treasury bonds 5,611, Municipal bonds 3,720 and dividends 9,000. The dividend income is from large public corporations. The company sold investment securities at a loss of $7,100.
ABC operating expenses are $1,907,324. Included in that amount are bad debt expense (allowance method) of $21,950, depreciation of $78,733, fine of $10,000 for violation of local zoning laws, and restructuring costs of $80,000. The restructuring costs reflect estimated future costs related to a plant which was closed in the current year.Accounts receivable actually written off in the current year are $17,420. MACRS depreciation is $80,525.
Question; Compute income per books before income taxes and Compute taxable income, by means of a reconciliation of book income to taxable income.
Explanation / Answer
ANSWER:
COMPUTATION OF TAXABLE INCOME
PARTICULARS AMOUNT
Gross profit 3,265,130
less:operating expenses $1,907,324
depreciation $78,733
estructuring costs $80,000
add :bad debts $21950
less:accounts receivable $17420
total taxable income $1159703