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compute the taxpayers [a] book income, [b] taxable income, and [c] book/tax differences. Taxpayer Information : Acme, Inc. is an accrual-basis, calendar-year wholesaler. Acme was
compute the taxpayers [a] book income, [b] taxable income, and [c] book/tax differences.
Taxpayer Information:
Acme, Inc. is an accrual-basis, calendar-year wholesaler.
- Acme was incorporated on January 4, 2019.
- Acmes employer identification number is 31-1584392.
- Acmes main office is located at 51515 Sycamore Road, DeKalb, IL 60115.
- Acme has total assets as of December 31, 2020 of $6,870,900.
- Acmes GAAP income statement for the year reported the following:
- $2,998,000 of total sales for the year. Returns and allowances of $82,000 were subsequently granted to customers who received goods that was damaged.
- $20,700 of interest income was received during the year. Of this total, $5,800 was earned on City of DeKalb bonds.
- $32,000 of prepaid rent was received in late December 2020 from a company that will lease excess space in its largest warehouse from February 1 through October 31, 2021.
- $57,000 of dividends received from a domestic corporation in which Acme owns 5% of the outstanding stock.
- ($8,700) loss on the sale of investment securities.
- Acmes GAAP income statement for the year also reported the following:
- Cost of Goods Sold $1,132,700
- Salaries (including Officers Compensation of $180,000) 690,000
- Federal income tax expense 167,800
- Depreciation expense 118,400
- State & Local Taxes 43,500
- Interest Expense 7,000
- Repairs 12,000
- Rent expense 37,200
- Advertising expense 25,000
- Bad debts 30,800
- Property/Casualty Insurance Premiums 12,000
- Business Meals from restaurants 9,400
- Business Meals not from restaurants 4,200
Additional information is as follows:
- Depreciation for tax purposes totaled $197,700.
- Acme wrote off $38,400 of accounts receivable as uncollectible this year.
- Acmes loss on the sale of investment securities is considered a capital loss for tax purposes.
- During its first year of operations, Acme generated a $67,000 net operating loss.
- Acme made the following estimated income tax payments to the IRS for 2020:
- Overpayment in 2019, credited to 2020 $43,000
- 2nd quarter 35,000
- 3rd quarter 35,000
- 4th quarter 35,000
- Acme does not qualify for any other tax credits in 2020.
- Any overpayment of 2020 tax should be credited to its 2021 estimated taxes.
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