3-13 E&P Computation. For its current taxable year, K Corporation, a manufacturer of nuts and bolts, reported the following information using the accrual method of accounting: Income: Sales.. Cost of goods sold (LIFO).. Gross profit from operations Interest income: Municipal bonds. Corporate bonds. Dividends received .. Ordinary income on installment sale. Life insurance proceeds..... Expense: Selling and administrative expenses Amortization of organization expense. Fines for overweight trucks... Depreciation..... Long-term capital loss... Net operating loss from prior year $575,000 (175,000) $400,000 9,000 20,000 10,000 14,000 50,000 Required: a. Compute K Corporation's taxable income. b. Compute K's current E&P. 90,000 500 1,000 50,000 3,000 60,000 In addition to the information above, the company's records reveal: 1. Cost of goods sold using FIFO would have been $150,000. 2. The dividends were received from a 30 percent owned domestic corporation. 3. The installment sale income arose from the sale of land for $100,000 (basis $30,000); $20,000 cash was received this year. The income was ordinary due to previous reporting of net 1231 losses. 4. Life insurance proceeds arose from the death of the company's chief executive officer; K Corporation had paid the premiums on a term insurance policy covering the officer. 5. Organization expense represented amortization of total organization expense of $2,500. 6. Depreciation was computed using accelerated methods; straight-line depreciation using the appropriate recovery periods would have been $37,000. 7. Cash distributions to shareholders during the year were $12,000.