Question: EFG an accrual basis calendar year corporation reported 500 000 net

EFG, an accrual basis calendar year corporation, reported $500,000 net income before tax on its financial statements prepared in accordance with GAAP. EFG’s records reveal the following information:
• The allowance for bad debts as of January 1 was $58,000. Write-offs for the year totaled $13,800, and the addition to the allowance for the year was $12,500. The allowance as of December 31 was $56,700.
• EFG paid a $17,500 fine to the state of Delaware for a violation of state pollution control laws.
• EFG was sued by a consumers group for engaging in false advertising practices. Although EFG’s lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $50,000 allowance for contingent legal liability and reporting a $50,000 accrued expense on the income statement.
• EFG received a $165,000 advanced payment for 10,000 units of inventory on October 20. EFG reported the payment as revenue the following February when the units were shipped. Compute EFG’s taxable income.

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  • CreatedNovember 03, 2015
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