3-13 E&P Computation. For its current taxable year, K Corporation, a manufacturer of nuts and bolts,...

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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. 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.