XYZ is a calendar-year corporation that began business on January 1. 2020. For the year, it...

 

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XYZ is a calendar-year corporation that began business on January 1. 2020. For the year, it reported the following intormation in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-5 XYZ corp. Incone statenent Book For current year Incone $ 40, 000, 000 (27, 000, 000) $ 13, 680, 000 Revenue from sales Cost of Goods sold Gross profit other incone: Incone from investment in corporate stock Interest incone 30e, e08 20, 000 (4, 000) 3, 000 50, 000 13, 369, 000 Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous incone Gross Income Expenses: Compensation stock option compensation (7, 580, e00) (200, e00) (1, 350, 000) (75, 000) (22, 000) (41, eee) (1, 400, 000) (70, 000) (58e, 000) (18, 000) (30, 000) (44, 000) (140, 808) $(11, 390, 000) 1,979, 000 (400, 000) $ 1,579, 000 Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairnent Organizational expenditures Other expenses Total expenses Incone before taxes Provision for incone taxes Net Income after taxes 1 XYZ owns 30 percent of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported S1.000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earmings for the year. HC also distributed a $200,000 dividend to XYZ. 2. Of the $20,000 interest income, $5,000 was from a City of Seatle bond, S7,000 was from a Tacoma City bond, S6,000 was from a fully taxable corporate bond, and the remaining $2.000 was trom a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (e. it does not quality as 51231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6. XYZ actually wrote off $27,000 of its accounts receivable as uncolectible. 7. Tax depreciation was $1.900.000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $s00,000 of cash contributions to qualified charities during the year. XYZ did not elect to use the 25% of modified taxable income limitation to determine its charitable contribution deduction. 10.mon July 1 of this year XYZ acquired the assets of another business. In the process, it acquired S300,000 of goodwill. At the end of the year, XYZ wrote off $30,000 of the goodwil as impaired. 11 MXYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12-mThe other expenses do not contain any items with book-tax differences. 13. mThis is an estimated tax provision (tederal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $360,000 (590,000 per quarter). For purposes of estimated tax liabilties. assume XYZ was in existence in 2019 and that in 2019 it reported a tax liability of $500,000. During 2020, XYZ determined its taxable income at the end of each of the four quarters as follows Quarter-endcumulative taxable income (loss) 400, 000 First Second Third 1, 100, 000 1, 400, 000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) EXHIBIT 144 Stack Owaenhip and Disidends Receved Deduction Perccelage Recsin ing Carperation's Stack Cwarhip in Distriluting Curperatina' Stock Lenu sham 20 percent ar lent 20 perum b le an 0 pn pervat e ee * quol for she 100 percet dridral recenud she reentg f adurbang corgaratae nur de ie ste same at groip m deneribed an 14 The s0 prcent oerlp mpeme n che a orkap ivel repural fer achesi e le nane eet grosp Dividends Recrived edetie Perceatage 100 a. Compute XYz's taxable income. Taxable income b. Compute XYZ's income tax liability. Tax liability c. Complete XYZ's Schedule M-1. (Enter all amounts as positive numbers.) Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return 1. Net income (loss) per books 2. Federal income tax provision 3. Excess of capital losses over capital gains 4. Income subject to tax not recorded on books this year (itemize) Expenses recorded on books this year not deducted on this return 5. (itemize): la. Depreciation b. Contributions carryover c. Meals Stock option compensation (incentive stock options) Bad debt expense Warranty expense Goodwill impairment Organizational expenditures 6. Total Income recorded on books this year not included on this return 277,960 $277,960 7. (itemize): Tax-exempt interest Income from investment in corporate stock Deductions on this return not charged against book income this year (itemize): a. Depreciation b. Contributions carryover 9. Total 10. Income 8. $277,960 a. Complete XYZ's Form 120, page 1 Please right click on the attached Adobe document and select open in new window, Then, downioad the Tax Form and enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save." Use 2020 tax rules regardless of year on tax form. XYZ is a calendar-year corporation that began business on January 1. 2020. For the year, it reported the following intormation in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-5 XYZ corp. Incone statenent Book For current year Incone $ 40, 000, 000 (27, 000, 000) $ 13, 680, 000 Revenue from sales Cost of Goods sold Gross profit other incone: Incone from investment in corporate stock Interest incone 30e, e08 20, 000 (4, 000) 3, 000 50, 000 13, 369, 000 Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous incone Gross Income Expenses: Compensation stock option compensation (7, 580, e00) (200, e00) (1, 350, 000) (75, 000) (22, 000) (41, eee) (1, 400, 000) (70, 000) (58e, 000) (18, 000) (30, 000) (44, 000) (140, 808) $(11, 390, 000) 1,979, 000 (400, 000) $ 1,579, 000 Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charitable donations Meals Goodwill impairnent Organizational expenditures Other expenses Total expenses Incone before taxes Provision for incone taxes Net Income after taxes 1 XYZ owns 30 percent of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported S1.000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earmings for the year. HC also distributed a $200,000 dividend to XYZ. 2. Of the $20,000 interest income, $5,000 was from a City of Seatle bond, S7,000 was from a Tacoma City bond, S6,000 was from a fully taxable corporate bond, and the remaining $2.000 was trom a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (e. it does not quality as 51231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6. XYZ actually wrote off $27,000 of its accounts receivable as uncolectible. 7. Tax depreciation was $1.900.000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $s00,000 of cash contributions to qualified charities during the year. XYZ did not elect to use the 25% of modified taxable income limitation to determine its charitable contribution deduction. 10.mon July 1 of this year XYZ acquired the assets of another business. In the process, it acquired S300,000 of goodwill. At the end of the year, XYZ wrote off $30,000 of the goodwil as impaired. 11 MXYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12-mThe other expenses do not contain any items with book-tax differences. 13. mThis is an estimated tax provision (tederal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $360,000 (590,000 per quarter). For purposes of estimated tax liabilties. assume XYZ was in existence in 2019 and that in 2019 it reported a tax liability of $500,000. During 2020, XYZ determined its taxable income at the end of each of the four quarters as follows Quarter-endcumulative taxable income (loss) 400, 000 First Second Third 1, 100, 000 1, 400, 000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) EXHIBIT 144 Stack Owaenhip and Disidends Receved Deduction Perccelage Recsin ing Carperation's Stack Cwarhip in Distriluting Curperatina' Stock Lenu sham 20 percent ar lent 20 perum b le an 0 pn pervat e ee * quol for she 100 percet dridral recenud she reentg f adurbang corgaratae nur de ie ste same at groip m deneribed an 14 The s0 prcent oerlp mpeme n che a orkap ivel repural fer achesi e le nane eet grosp Dividends Recrived edetie Perceatage 100 a. Compute XYz's taxable income. Taxable income b. Compute XYZ's income tax liability. Tax liability c. Complete XYZ's Schedule M-1. (Enter all amounts as positive numbers.) Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return 1. Net income (loss) per books 2. Federal income tax provision 3. Excess of capital losses over capital gains 4. Income subject to tax not recorded on books this year (itemize) Expenses recorded on books this year not deducted on this return 5. (itemize): la. Depreciation b. Contributions carryover c. Meals Stock option compensation (incentive stock options) Bad debt expense Warranty expense Goodwill impairment Organizational expenditures 6. Total Income recorded on books this year not included on this return 277,960 $277,960 7. (itemize): Tax-exempt interest Income from investment in corporate stock Deductions on this return not charged against book income this year (itemize): a. Depreciation b. Contributions carryover 9. Total 10. Income 8. $277,960 a. Complete XYZ's Form 120, page 1 Please right click on the attached Adobe document and select open in new window, Then, downioad the Tax Form and enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save." Use 2020 tax rules regardless of year on tax form.