(Note: Students may want to review the material on accounting for trading securities in Chapter 16 before beginning this problem.)

Over the past two years, Madison Corporation has accumulated operating loss carryforwards of $66,000. This year, 2017, Madison's pre-tax book income is $101,500. The company is subject to a 35% corporate tax rate. The following items are relevant to Madison's deferred tax computations for 2017.

1. Equipment purchased in 2014 is depreciated on a straight-line basis for financial reporting purposes and using an accelerated method for tax purposes as follows:

2. Madison's trading securities portfolio generated a $13,000 unrealized gain that is not recognized for tax purposes until the securities are sold.
3. Madison has not yet paid its rent for November and December of 2017, a total of $25,000.
The expense was accrued for book purposes and is included in pre-tax book income, but it is not tax deductible until paid.
4. During 2017, Madison paid a $6,500 fine to its state corporation commission for allegedly violating state security laws. Madison neither denied nor admitted guilt related to the charges. The payment is not deductible for tax purposes but has been included in computing pre-tax book income.
Required:
1. Determine Madison Corporation's taxable income for 2017.
2. Calculate the amount of tax due for Madison Corporation for 2017.

Year Book Tax 2014 2015 2016 2017 2018 $100,000 100,000 100,000 100,000 100,000 $200.000 150,000 100,000 50,000