1. The books of ABC corporation show the following results of operations for the year:

 

Income:

 

Sales (net amount after deducting cost of sales)                                                   $260,000

Interest on state of California bonds                                                                              500

Dividends on stock of domestic corporations (30% of stock owned by ABC)            1000

Dividends on stock of foreign corporations                                                                    500

Gain from the sale of land used in the business, purchased in 2006                      3,000

                                                                                                                                             $265,000

 

Expenses: 

 

Cash contributions to charity fund                                                      12,000

Insurance premium paid to policy on life of officer

           on which the corporation is the beneficiary                             1,500

Depreciation                                                                                             12,000

Loss on sale of securities (purchased for investment in 2006)           6,000

Other expenses                                                                                         166,000        197,500

 

Net Income before Federal Income taxes                                                                     $67,500

 

Additional data:

            Dividends paid in cash                                    $30,000

            Retained earnings January 1                          100,000

            Retained earnings December 31                    120,200

 

            The other expenses of $166,000 our deductible for federal income tax purposes.

            

            Depreciation allowable for federal income tax purposes is $10,000.     

 

            The book provision for federal income tax is $17,300.

 

Required:

1. Compute the taxable income.
2. Prepare federal schedules M-1 and M-2 for the tax return of the form provided.

Answer rating: 100% (QA)

Answer a COMPUTATION OF TAXABLE INCOME GROSS SALES 26000... View the full answer