Contemporary Tax Practice: Chapter 17

For the year ended de ember 31 EFG a calendar year accrual basis corporation reported $479,900 net income after tax on its financial statement prepared in accordance with GAAP. The corparations financial records included the following:

1. EFG earned 314,800 from a qualified domestic production activity eligible for the 9% deduction.

2. EFG earned 10,700 on an investment in tax exempt municipal bonds.

3. EFG's allowance for bad debts as of 1/1 was 21,000. Write offs for the year total 4,000 while the addition to the allowance was 3,700. The balance in the allowance account on 12/31 was 20,300?

4. EFG paid a 6,000 fine to a municipal government for violating a local zoning ordinance.

5. Depreciation per books was 44,200 and MACRS depreciation was 31,000

6. EFT has an 8,000 capital loss carryover. This year, it has a Code Sec. 1231 gain on the sale of equipment of 31,000

7. EFG capitalized organization costs of 6,900 and elected to amortize the costs over 180 months for book purpose it expenses the cost.

8 EFGs federal income tax expense per book was 243,000.

Require:

a. Compute EFG's taxable income and regular income tax expenses

c. Prepare the journal entry to record the tax accrual.