The Beverly corporation had the following transactions and circumstances during 2018:

• Effective January 2, 2018, Beverly made a 40% Investment in the Fuse technologies company. Fuse’s net Income for calendar year 2018 was $ 90,000,000.
• Beverly earned interest of $ 7,600,000 on tax-exempt bond investment.
• On May 1, 2018, Beverly sold a building in which it had a carrying value of $ 66,000,000 for $ 52,000,000 in cash.
• On June 30, 2018, Beverly purchased 100% of the capital stock of Shell electronics co for $ 150,000,000 at a time when the fair value of the stock was $ 120,000,000. The tax authorities permit a level annual cost recovery of goodwill over 15 years. The management of Beverly found no impairment of value in its investment in Shell Electronics in 2018.
• Beverly paid the annual premium of $ 5,000,000 for life insurance policies of the company’s upper management, but the company does not receive a deduction for those payments.
• In August, 2018, Beverly had to pay $ 12,000,000 to the tax authorities based on a miscalculation of prior years taxes. This payment included interest of $ 1,000,000.
• Beverly’s expense for import duties in 2018 was $ 15,200,000. The company will be permitted one-half of that amount as a deduction in 2018 with no carry-over to future years.
• In September 2018, Beverly was notified that the courts had determined that s $ 15,000,000 “marketing” payment made during 2018 to a company in the country of Concretia was illegal under the requirement of the U.S Foreign corrupt practices Act. Later that month, Beverly was further notified of a court decision that a similar payment made in 2017 to a Company in Grand Wachovia for $ 18,000,000 was illegal.
• For 2018, accelerated cost recovery of $ 36,000,000 was allowed for taxes purposes on Beverly’s property plant and equipment. Depreciation determine using generally accepted accounting principles was $ 49,200,000.
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• Beverly made a $ 30,000,000 charitable contribution on January 2, 2016 but is permitted to take only 1/3 of that amount each year as a deduction.
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• At December 31,2018 Beverly’s management made a preliminary calculation of earnings before taxes of $ 200,000,000. However, an accounting error was subsequently discovered (an expense of $ 16,000,000 had been improperly capitalized as an asset) and was corrected.
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• Assuming a blended income tax rate of 40%, prepare a computation of the total income tax liability of the Beverly corporation for 2018
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• Prepare a schedule of taxable income for 2018.

Answer rating: 100% (QA)

Calculation of Taxable income for 2018 EBIT 200000000 LessCa... View the full answer