Arnold Corporation (a calendar-year, accrual-basis taxpayer) reported $500,000 pre-tax income on its financial statements for the year.

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Arnold Corporation (a calendar-year, accrual-basis taxpayer) reported $500,000 pre-tax income on its financial statements for the year. In examining its records, you find the following:
• $3,000 of interest income from municipal bonds
• $200 of expenses incurred in earning the interest income from the municipal bonds
• Arnold wrote off $900 of accounts receivable as uncollectible and added $3,000 to its allowance for bad debts this year.
• Arnold deducted $4,000 for meals and entertainment expenses on its financial statements.
Straight-line depreciation for financial reporting is $7,000; MACRS tax depreciation is $11,000
• Arnold paid $2,800 in premiums on key officer life insurance policies for which it is the beneficiary
• Arnold collected $50,000 from a life insurance policy due to the death of a key officer
• Arnold paid $2,500 in fines for violating Environmental Protection Agency anti-pollution regulations.
a. Identify Arnold's permanent and temporary book/tax differences.
b. Compute Arnold's taxable income and income tax payable.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Taxation For Decision Makers 2014

ISBN: 9781118654545

6th Edition

Authors: Shirley Dennis Escoffier, Karen Fortin

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