ABC Corporation is a publicly traded company that started operations on 1/1/2020. ABC Corporation has operations only
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Question:
ABC Corporation has operations only in the state of Nevada.
You have been assigned to compute the income tax provision and prepare the income tax footnote for ABC Corporation for the two years ended December 31, 2020 and 2021.
The following relevant information is gathered from the financial records for the period 1/1/2020 through 12/31/2021
Pre-tax book income (loss) $ (3,000,000) $ 5,000,000
Accounts Receivables written off $ 25,000 $ 25,000
Bad Debt expense recorded on books $ 100,000 $ 100,000
Book Stock-Based Compensation expense - Restricted Stock Units ("RSU") (10,000 shares granted at the beginning
of each year when the stock price was $10) $ 100,000 $ 100,000
All of the 20,000 RSU's were vested at the end of 2021 when the value of the stock was $25
Dividends received from XYZ Corp (ABC owns less than 0.1% of XYZ Corp stock) $ 50,000 $ 50,000
Entertainment Expense $ 25,000 $ 25,000
Interest income from CA municipal bonds $ 50,000 $ 50,000
Meals expensed for book purposes (50% deductible for tax purposes) $ 100,000 $ 100,000
Penalties paid $ 20,000 $ 20,000
Purchased new machinery in each of 2020 and 2021 - Book Depreciation SL over 5 years $ 1,000,000 $ 1,000,000
Warranties Paid $ 25,000 $ 25,000
Warranty Reserves accrued on books $ 100,000 $ 100,000
R&D Credits generated $ 100,000 $ 100,000
Uncertain Tax Position (FIN 48) reserve for R&D Credits 25% 25%
Purchased 100% stock of DEF Corporation for $10 million on 1/1/2021. DEF's only asset was a Trademark valued at $8 million for book purposes with no tax basis.
Book Amortization $ 533,333
Prepare the Income Tax footnote that includes the following:
Current and Deferred Income Tax Expenses
Effective Tax Rate Reconciliation
Deferred tax asset/liability table
Uncertain tax position/benefit table
Valuation Allowance considerations
Amount of Net Operating Losses and Credits carryover Open tax years
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: