Croyden is a calendar year, accrual basis corporation. Mr. and Mrs. Croyden (cash basis taxpayers) are the sole corporate shareholders. Mr. Croyden is president of the corporation, and Mrs. Croyden is vice president. Croyden's financial records, prepared in accordance with GAAP, show the following information for the year: Use Table 7-1 and Tablee 7-2 Revenues from sales of goods $12,900,000 (9,260, 000) 3,640,000 Cost of goods sold (LIFO) Gross profit Bad debt expense Administrative salaries and wages 24,000 612,000 135,000 33, 900 67,000 19, 800 State and local business taxes Interest expense Advertising Annual property insurance premiums Annual life insurance premiums Depreciation expense Repairs, maintenance, utilities 7,300 148, 800 81,000 Croyden's records reveal the following facts: Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes Because of the UNICAP rules, Croyden's cost of goods sold for tax purposes exceeds cost of goods sold for financial statement purposes by $219,000. Bad debt expense equals the addition to the corporation's allowance for bad debts. Actual write-offs of uncollectible accounts during the year totaled $31,200. Administrative salaries include an accrued $50,000 year-end bonus to Mr. Croyden and an accrued $20,000 year-end bonus to Mrs. Croyden. These bonuses were paid on January 17 of tthe following year. The life insurance premiums were on key-person policies for Mr. and Mrs. Croyden. The corporation is the policy beneficiary. Croyden disposed of two assets during the year. (These dispositions are not reflected in the financial statement information shown.) It sold office furnishings for $45,000. The original cost of the furnishings was $40,000, and accumulated MACRS depreciation through date of sale was $12,700. It also exchanged transportation equipment for a 15 percent interest in a partnership. The original of the transportation equipment was $110,000, and accumulated MACRS depreciation through date of exchange was $38,900 MACRS depreciation for disposed of this year) is $187,600. The only asset acquired this year was new equipment costing $275,000. The equipment has a seven-year recovery period and was placed in service on February 11. Assume that Croyden does not elect Section 179 or bonus depreciation with respect to this acquisition. Croyden's prior-year tax returns show no nonrecaptured Section 1231 losses and a S7,400 capital loss carryforward. cost assets placed in service in prior years (including the office furnishings and transportation equipment Solely on the basis of these facts, compute Croyden's taxable income. (Round your intermediate computations to the nearest whole dollar amount.) Taxable income Recovery Periods for Tangible Business Assets TABLE 7.1 MACRS Recovery Period Assets Included 3 years Small manufacturing tools, racehorses and breeding hogs, special handling devices used in food manufacturing. 5 years Cars, trucks, buses, helicopters, computers, typewriters, duplicating equipment, breeding and dairy cattle, and cargo containers. 7 years Office furniture and fixtures, railroad cars and locomotives, most machinery and equipment. Single-purpose agricultural and horticultural structures; assets used in 10 years petroleum refining, vessels, barges, and other water transportation equipment; fruit- or nut-bearing trees and vines. 15 years Land improvements such as fencing, roads, sidewalks, bridges, irrigation systems, and landscaping; telephone distribution plants; pipelines; billboards; and service station buildings. Certain farm buildings, municipal sewers. 20 years 25 years Commercial water utility property. 27.5 years Residential rental real property (duplexes and apartments). 39 years Nonresidential real property (office buildings, factories, and warehouses). 50 years Railroad grading or tunnel bore. MACRS for Business Personalty (Half-Year TABLE 7.2 Convention) Recovery Period 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year Depreciation Rate 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 32.00 2 44.45 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 14.40 8.55 6.677 11.52 6.177 4 7.41 12.49 11.52 7.70 11.52 8.93 6.93 5.713 9.22 7.37 5.285 5.76 8.92 6.23 6.55 7 8.93 5.90 4.888 5.90 4.46 6.55 4.522 9 6.56 5.91 4.462 10 6.55 5.90 4.461 4.462 11 3.28 5.91 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 4.461 16 2.95 4.462 17 4.461 18 19 4.462 20 4.461 21 2.231 LO O NO0 Croyden is a calendar year, accrual basis corporation. Mr. and Mrs. Croyden (cash basis taxpayers) are the sole corporate shareholders. Mr. Croyden is president of the corporation, and Mrs. Croyden is vice president. Croyden's financial records, prepared in accordance with GAAP, show the following information for the year: Use Table 7-1 and Tablee 7-2 Revenues from sales of goods $12,900,000 (9,260, 000) 3,640,000 Cost of goods sold (LIFO) Gross profit Bad debt expense Administrative salaries and wages 24,000 612,000 135,000 33, 900 67,000 19, 800 State and local business taxes Interest expense Advertising Annual property insurance premiums Annual life insurance premiums Depreciation expense Repairs, maintenance, utilities 7,300 148, 800 81,000 Croyden's records reveal the following facts: Under the UNICAP rules, Croyden had to capitalize $142,800 of administrative wages to inventory. These wages were expensed for financial statement purposes Because of the UNICAP rules, Croyden's cost of goods sold for tax purposes exceeds cost of goods sold for financial statement purposes by $219,000. Bad debt expense equals the addition to the corporation's allowance for bad debts. Actual write-offs of uncollectible accounts during the year totaled $31,200. Administrative salaries include an accrued $50,000 year-end bonus to Mr. Croyden and an accrued $20,000 year-end bonus to Mrs. Croyden. These bonuses were paid on January 17 of tthe following year. The life insurance premiums were on key-person policies for Mr. and Mrs. Croyden. The corporation is the policy beneficiary. Croyden disposed of two assets during the year. (These dispositions are not reflected in the financial statement information shown.) It sold office furnishings for $45,000. The original cost of the furnishings was $40,000, and accumulated MACRS depreciation through date of sale was $12,700. It also exchanged transportation equipment for a 15 percent interest in a partnership. The original of the transportation equipment was $110,000, and accumulated MACRS depreciation through date of exchange was $38,900 MACRS depreciation for disposed of this year) is $187,600. The only asset acquired this year was new equipment costing $275,000. The equipment has a seven-year recovery period and was placed in service on February 11. Assume that Croyden does not elect Section 179 or bonus depreciation with respect to this acquisition. Croyden's prior-year tax returns show no nonrecaptured Section 1231 losses and a S7,400 capital loss carryforward. cost assets placed in service in prior years (including the office furnishings and transportation equipment Solely on the basis of these facts, compute Croyden's taxable income. (Round your intermediate computations to the nearest whole dollar amount.) Taxable income Recovery Periods for Tangible Business Assets TABLE 7.1 MACRS Recovery Period Assets Included 3 years Small manufacturing tools, racehorses and breeding hogs, special handling devices used in food manufacturing. 5 years Cars, trucks, buses, helicopters, computers, typewriters, duplicating equipment, breeding and dairy cattle, and cargo containers. 7 years Office furniture and fixtures, railroad cars and locomotives, most machinery and equipment. Single-purpose agricultural and horticultural structures; assets used in 10 years petroleum refining, vessels, barges, and other water transportation equipment; fruit- or nut-bearing trees and vines. 15 years Land improvements such as fencing, roads, sidewalks, bridges, irrigation systems, and landscaping; telephone distribution plants; pipelines; billboards; and service station buildings. Certain farm buildings, municipal sewers. 20 years 25 years Commercial water utility property. 27.5 years Residential rental real property (duplexes and apartments). 39 years Nonresidential real property (office buildings, factories, and warehouses). 50 years Railroad grading or tunnel bore. MACRS for Business Personalty (Half-Year TABLE 7.2 Convention) Recovery Period 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year Depreciation Rate 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 32.00 2 44.45 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 14.40 8.55 6.677 11.52 6.177 4 7.41 12.49 11.52 7.70 11.52 8.93 6.93 5.713 9.22 7.37 5.285 5.76 8.92 6.23 6.55 7 8.93 5.90 4.888 5.90 4.46 6.55 4.522 9 6.56 5.91 4.462 10 6.55 5.90 4.461 4.462 11 3.28 5.91 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 4.461 16 2.95 4.462 17 4.461 18 19 4.462 20 4.461 21 2.231 LO O NO0