C-Corporation Notes to Financial Statements

Fielding Sporting Goods Corporation (FSGC) is a calendar-year corporation. Please see the C-Corporation Reconciliation Template excel file for FSGCs current-year audited financial income statement. Notes with important tax information to accompany those financials are provided below.

Notes:

1. FSGC owns 40 percent of the outstanding Magnolia Corp. (MC) stock. Magnolia Corp. reported $1,000,000 of income for the year. FSGC accounted for its investment in MC under the equity method and it recorded its pro rata share of MCs earnings for the year. MC also distributed a $150,000 dividend to FSGC.

2. Of the $20,000 interest income, $7,000 was from a City of Atlanta municipal bond, $5,500 was from a Dekalb County municipal bond, $3,500 was from a fully taxable corporate bond, and the remaining $4,000 was from a money market account.

3. This amount includes officer compensation of $2,500,000 (one officer received $1,500,000 compensation, the remaining $1,000,000 was allocated equally between 4 other officers).

4. This amount is the portion of non-qualified stock option compensation that was expensed during the year (recipients are officers). There were no exercises during the year.

5. FSGC actually wrote off $90,000 of its accounts receivable as uncollectable.

6. Regular tax depreciation calculated under MACRS was $1,600,000.

7. In the current year, FSGC paid $20,000 of actual payments on warranties it provided to customers.

8. FSGC made $425,000 of cash contributions to qualified charities during the year.

9. On July 1 of this year, FSGC acquired the assets of another business. In the process it acquired $300,000 of goodwill. At the end of the

   year, FSGC wrote off $30,000 of the goodwill as impaired.

10. The other expenses do not contain any items with book-tax differences.

11. This is an estimated tax provision (federal tax expense) for the year. Assume that FSGC is not subject to state income taxes.