Question

Over the past two years, Madison Corporation has accumulated operating loss carryforwards of $66,000. This year, 2014, Madison’s pre-tax book income is $101,500. The company is subject to a 40% corporate tax rate. The following items are relevant to Madison’s deferred tax computations for 2014.
1. Equipment purchased in 2011 is depreciated on a straight-line basis for financial reporting purposes and using an accelerated method for tax purposes as follows:


2. Madison’s trading securities portfolio generated a $13,000 unrealized gain that is not recognized for tax purposes until the securities are sold.
3. Madison has not yet paid its rent for November and December of 2014, a total of $25,000.
The expense was accrued for book purposes and is included in pre-tax book income, but it is not tax deductible until paid.
4. During 2014, Madison paid a $6,500 fine to its state corporation commission for allegedly violating state security laws. Madison neither denied nor admitted guilt related to the charges. The payment is not deductible for tax purposes but has been included in computing pre-tax book income.

Required:
1. Determine Madison Corporation’s taxable income for 2014.
2. Calculate the amount of tax payable for Madison Corporation for2014.


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  • CreatedSeptember 10, 2014
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