Problem 1: Chapter 2 (25 pts total, 5 pts each)

Brown Corporation has the following items for Year 1. Its income statement is as follows.

Income 4,440,000 Sales (1,840,000) Cost of goods sold 2,600,000 Gross Profit Dividends received from stock investments in

Less than 20% owned U.S. corporations 35,000

Interest income

State bonds 12,000

Corporate bonds 16,000 28,000

Total Income 2,663,000

Expenses Salaries 1,000,000 Taxes (state, local, and payroll) 190,000

Repairs and maintenance 112,000 Net Capital Loss 25,000 Interest expense:

Loan to purchase state bonds 7,000

Other business loans 174,000 181,000

Advertising 132,000

Depreciation for book purpose* 80,000 Charitable contributions 100,000 Employee benefit programs (a regular corporate expense) 48,000

Premiums on term life insurance policies on lives

of Janet and Kim 32,000

Total expenses (1,900,000)

Net income before taxes 763,000

Federal Income tax (282,370) Net income per books 470,630

*Depreciation for tax purposes is $110,000.

(a) What is the dividend received deduction? (This is a deduction. So write the number and the sign. For example, if the answer is -1000, write -1000 or -1,000) (it is not 21,000 or 7,000)/

(e) What is Brown's taxable income this year?