In its first taxable year, Band Corporation recognized $957,500 ordinary business income and a $5,500 capital loss.

Question:

In its first taxable year, Band Corporation recognized $957,500 ordinary business income and a $5,500 capital loss. In its second taxable year, Band recognized $1,220,000 ordinary business income, a $12,500 Section 1231 loss, and a $2,000 capital gain.

a. Compute Band's book and taxable income for its first year.

b. Using a 34 percent tax rate, compute Band's deferred tax asset or liability (identify which) on its balance sheet on the last day of the year.

c. Compute Band's book and taxable income for its second year.

d. Using a 34 percent tax rate, compute Band's deferred tax asset or liability (identify which) on its balance sheet on the last day of the second year.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... 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...