Question
The following adjusted revenue and expense accounts appeared in the accounting records of Pashi, Inc., an accrual basis taxpayer, for the year ended December 31,
The following adjusted revenue and expense accounts appeared in the accounting records of Pashi, Inc., an accrual basis taxpayer, for the year ended December 31, Year 2.
Revenues
Net sales $3,000,000 Interest 18,000 Gains on sales of stock 5,000 Key-man life insurance proceeds 100,000 Subtotal
$3,123,000
Costs and Expenses
Cost of goods sold $2,000,000 Salaries and wages 500,000 Bad debt expense 13,000 Taxes, other than federal income 62,000 Interest 12,000 Contributions 5,000 Depreciation 60,000 Other 40,000 Federal income taxes 120,000 Subtotal
$2,812,000
Net Income $311,000
The following additional information is provided:
1. Interest revenue consists of:
Corporate bonds $15,000 Municipal bonds 3,000
2. Gains on sales of stock consist of the following unrelated corporations:
Ral Corp. (bought in May Year 1, sold in June Year 2) $1,000 Blu, Inc. (bought in November Year 1, sold in September Year 2) 4,000
3. Pashi, Inc. owned the key-man life insurance policy, paid the premiums, and was the direct beneficiary. The proceeds were collected on the death of the corporation's treasurer.
4. Bad debt expense represents a reasonable addition to Pashi, Inc.'s allowance for uncollectible accounts, under the method consistently used. Actual accounts written off in Year 2 amounted to $4,000.
5. Taxes, other than federal income, consist of:
Payroll taxes $40,000 Property taxes 20,000 Penalty for late payment of taxes 2,000
6. Interest expense consists of $11,000 interest on funds borrowed for working capital and $1,000 interest on funds borrowed to buy the municipal bonds.
7. Contributions were all paid in Year 2 to State University, specifically designated for the purchase of laboratory equipment.
8. Depreciation per books is straight-line. For tax purposes, depreciation amounted to $85,000.
9. Other expenses include premiums of $5,000 on the key-man life insurance policy covering the treasurer, who died in December Year 2.
10. Federal income tax paid in Year 2 amounted to $105,000. The difference between the income tax provision and income tax paid is the result of temporary differences.
In the associated cells in column C, enter the appropriate amount for the item you selected in column B. Note that not all areas of the M-1 form are presented here.
The following adjusted revenue and expense accounts appeared in the accounting records of Pashi, Inc., an accrual basis taxpayer, for the year ended December 31, Year 2.
Revenues | |
Net sales | $3,000,000 |
Interest | 18,000 |
Gains on sales of stock | 5,000 |
Key-man life insurance proceeds | 100,000 |
Subtotal | $3,123,000 |
Costs and Expenses | |
Cost of goods sold | $2,000,000 |
Salaries and wages | 500,000 |
Bad debt expense | 13,000 |
Taxes, other than federal income | 62,000 |
Interest | 12,000 |
Contributions | 5,000 |
Depreciation | 60,000 |
Other | 40,000 |
Federal income taxes | 120,000 |
Subtotal | $2,812,000 |
Net Income | $311,000 |
The following additional information is provided:
1. Interest revenue consists of:
Corporate bonds | $15,000 |
Municipal bonds | 3,000 |
2. Gains on sales of stock consist of the following unrelated corporations:
Ral Corp. (bought in May Year 1, sold in June Year 2) | $1,000 |
Blu, Inc. (bought in November Year 1, sold in September Year 2) | 4,000 |
3. Pashi, Inc. owned the key-man life insurance policy, paid the premiums, and was the direct beneficiary. The proceeds were collected on the death of the corporation's treasurer.
4. Bad debt expense represents a reasonable addition to Pashi, Inc.'s allowance for uncollectible accounts, under the method consistently used. Actual accounts written off in Year 2 amounted to $4,000.
5. Taxes, other than federal income, consist of:
Payroll taxes | $40,000 |
Property taxes | 20,000 |
Penalty for late payment of taxes | 2,000 |
6. Interest expense consists of $11,000 interest on funds borrowed for working capital and $1,000 interest on funds borrowed to buy the municipal bonds.
7. Contributions were all paid in Year 2 to State University, specifically designated for the purchase of laboratory equipment.
8. Depreciation per books is straight-line. For tax purposes, depreciation amounted to $85,000.
9. Other expenses include premiums of $5,000 on the key-man life insurance policy covering the treasurer, who died in December Year 2.
10. Federal income tax paid in Year 2 amounted to $105,000. The difference between the income tax provision and income tax paid is the result of temporary differences.
In the associated cells in column C, enter the appropriate amount for the item you selected in column B. Note that not all areas of the M-1 form are presented here.
Step by Step Solution
3.23 Rating (158 Votes )
There are 3 Steps involved in it
Step: 1
The accompanying changed income and business ledgers showed up in the bookkeeping records of Pashi Inc an accumulation premise citizen for the year fi...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started