EFG, a calendar year, accrual basis corporation, reported $479,900 net income after tax on its financial statements prepared in accordance with GAAP. The corporation’s financial records reveal the following information: EFG earned $10,700 on an investment in tax-exempt municipal bonds. EFG’s allowance for bad debts as of January 1 was $21,000. Write-offs for the year totaled $4,400, while the addition to the allowance was $3,700. The allowance as of December 31 was $20,300. On August 7, EFG paid a $6,000 fine to a municipal government for a violation of a local zoning ordinance. EFG’s depreciation expense per books was $44,200, and its MACRS depreciation deduction was $31,000. This is EFG’s second taxable year. In its first taxable year, it recognized an $8,800 net capital loss. This year, it recognized a $31,000 Section 1231 gain on the sale of equipment. This was EFG’s only disposition of noninventory assets. In its first taxable year, EFG capitalized $6,900 organizational costs for tax purposes and elected to amortize the costs over 180 months. For book purposes, it expensed the costs. EFG’s federal income tax expense per books was $151,000.
EFG, a calendar year, accrual basis corporation, reported $479,900 net income after tax on its financial statements prepared in accordance with GAAP. The corporation’s financial records reveal the following information: EFG earned $10,700 on an investment in tax-exempt municipal bonds. EFG’s allowance for bad debts as of January 1 was $21,000. Write-offs for the year totaled $4,400, while the addition to the allowance was $3,700. The allowance as of December 31 was $20,300. On August 7, EFG paid a $6,000 fine to a municipal government for a violation of a local zoning ordinance. EFG’s depreciation expense per books was $44,200, and its MACRS depreciation deduction was $31,000. This is EFG’s second taxable year. In its first taxable year, it recognized an $8,800 net capital loss. This year, it recognized a $31,000 Section 1231 gain on the sale of equipment. This was EFG’s only disposition of noninventory assets. In its first taxable year, EFG capitalized $6,900 organizational costs for tax purposes and elected to amortize the costs over 180 months. For book purposes, it expensed the costs. EFG’s federal income tax expense per books was $151,000.
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 5BCRQ
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Question
EFG, a calendar year, accrual basis corporation, reported $479,900 net income after tax on its financial statements prepared in accordance with GAAP. The corporation’s financial records reveal the following information:
- EFG earned $10,700 on an investment in tax-exempt municipal bonds.
- EFG’s allowance for
bad debts as of January 1 was $21,000. Write-offs for the year totaled $4,400, while the addition to the allowance was $3,700. The allowance as of December 31 was $20,300. - On August 7, EFG paid a $6,000 fine to a municipal government for a violation of a local zoning ordinance.
- EFG’s
depreciation expense per books was $44,200, and its MACRS depreciation deduction was $31,000. - This is EFG’s second taxable year. In its first taxable year, it recognized an $8,800 net capital loss. This year, it recognized a $31,000 Section 1231 gain on the sale of equipment. This was EFG’s only disposition of noninventory assets.
- In its first taxable year, EFG capitalized $6,900 organizational costs for tax purposes and elected to amortize the costs over 180 months. For book purposes, it expensed the costs.
- EFG’s federal income tax expense per books was $151,000.
Required:
- Compute EFG’s taxable income and regular tax.
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