Calvin Corporation, has the following items of income and expense for the current year. Calculate (a) Calvin's taxable income and (b) income tax liability. Sales revenue $500,000 Cost of goods sold 360,000 Gross profit $140,000 Other revenue: Dividends (less than 2% ownership) $5,000 Interest received from municipal bonds 30,000 Expenses: Utilities $25,000 Insurance 15,000 Meals and entertainment 60,000 Charitable contributions 10,000 Net operating loss (from the previous year) $ 60,000 (a) Calvin's taxable income is $10,000; (b) the tax liability is $1,500 ($10,000×15%). Sales revenue $500,000 Cost of goods sold 360,000 Gross profit $140,000 Other revenue: Dividends 5,000 Net operating loss (from the previous year) (60,000) Expenses: Utilities (25,000) Insurance (15,000) Meals and entertainment (50% limitation) (30,000) Income before special deductions $15,000 Less: Charitable contribution 1 (1,500) Dividends-received deduction (70%) (3,500 ) 2 Taxable income $10,000 Tax liability ($10,000×15%)= $ 1,500