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XYZ is a calendar-year corporation that began business on January 1, 2021. For the year, it reported the following Information in its current-year audited income statement Notes with important tax information are provided below. Use Exhibit 16-6. XYZ corporation Income statement For current year Book Income Revenue from sales $ 41,600,000 Cost of Goods Sold (28.880,000 Gross profit $ 13,520,000 300,000 26,400 (4,000) 3,000 50,000 $ 13,895,480 Other income: Income from investment in corporate stock Interest income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross Income Expenses: Compensation Stock option compensation Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charitable donations Meals (all at restaurants) Gooddill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Het Income after taxes (7,516,000) (216,000) (1,366,000) (83,000) (30,000) (49,000) 6 (1,600,000)? (86,000) (500,000) (19,600) (34,2010 (44, ebe) 13 (156, 100) 12 S (11,699,660) $ 2, 195, 800 (400,000) $ 1,795,800 12 1. XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200.000 dividend to XYZ For tax purposes. HC reports the actual dividend received as income, not the pro rata share of HC's earnings 2 of the $26.400 interest income $6,600 was from a City of Seattle bond, $8.600 was from a Tacoma City bond $7600 was from a fully taxable corporate bond, and the remaining $3,600 was from a money market account 3. This gain is from equipment that XY2 purchased in February and sold in December (le, it does not qualify as 51231 gain) 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation), 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers) 6.XYZ actually wrote off $31.000 of its accounts receivable as uncollectible 7. Tax depreciation was $2.100,000 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers 9.XYZ mode $500,000 of cash contributions to qualified charities during the year. The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation 10. On July 1 of this year XYZ acquired the assets of another business. In the process it acquired $324,000 of goodwill. At the end of the year, XYZ wrote off $34,000 of the goodwill os impaired 11 XYZ expensed all of its organizational expenditures for book purposes XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes 12. The other expenses do not contain any items with book-tax differences 13. This is an estimated tax provision (federal tax expense) for the year Assume that XYZ is not subject to state income taxes Estimated tax information XYZ mode four equal estimated tax payments tooling $414,000 ($100,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2020 and that in 2020 it reported a tax liability of $556,000 During 2021 XYZ determined its taxable income at the end of each of the four quarters as follows: Quarter-end First Second Third Cumulative table inco (los) 489,000 $ 1,140,000 $ 1,450,000 Estimated tax information XYZ made four equal estimated tox payments totaling $414,000 ($100,000 per quarter). For purposes of estimated fox liabilities, assume XYZ was in existence in 2020 and that in 2020 it reported a tax liability of $556,000. During 2021 XYZ determined its taxable income at the end of each of the four quarters as follows: Cumulative taxable Quarter end incon (los) First $ 480,000 Second $1,140,000 Third $ 1,480,000 Finally, assume thot XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) o. Compute XYZ's taxable income. b. Compute XYZ's income tax liability Tax liability Muon Schedule M1 Schedule MI Schedule M. 1 Reconciliation of income (Loss) per Books With Income per Return Note. The corporation may be required to file Schedule M3 See instructions 1 Mal income per books Incorecorded by not 2 Federal income tax per books Included on this retum 3. Excess of capital capital gains mp ile out Income subject to tax not recorded on books Disyem.) O Dedon not chard 5 Expenses recorded on bola this year not deducted on this matum against book income Depreciation Deprecat Chable contin Charitate into Traw and wartainment Other Other (Ham) OS Anand Stooption companion incantato Badtexte Warranty pe Goodwinment Orgonal expenditures 6 de Brough Dom 1 2 3 THIS FORMISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELE, DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2001 Merci XYZ is a calendar-year corporation that began business on January 1, 2021. For the year, it reported the following Information in its current-year audited income statement Notes with important tax information are provided below. Use Exhibit 16-6. XYZ corporation Income statement For current year Book Income Revenue from sales $ 41,600,000 Cost of Goods Sold (28.880,000 Gross profit $ 13,520,000 300,000 26,400 (4,000) 3,000 50,000 $ 13,895,480 Other income: Income from investment in corporate stock Interest income Capital gains (losses) Gain or loss from disposition of fixed assets Miscellaneous income Gross Income Expenses: Compensation Stock option compensation Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charitable donations Meals (all at restaurants) Gooddill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Het Income after taxes (7,516,000) (216,000) (1,366,000) (83,000) (30,000) (49,000) 6 (1,600,000)? (86,000) (500,000) (19,600) (34,2010 (44, ebe) 13 (156, 100) 12 S (11,699,660) $ 2, 195, 800 (400,000) $ 1,795,800 12 1. XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200.000 dividend to XYZ For tax purposes. HC reports the actual dividend received as income, not the pro rata share of HC's earnings 2 of the $26.400 interest income $6,600 was from a City of Seattle bond, $8.600 was from a Tacoma City bond $7600 was from a fully taxable corporate bond, and the remaining $3,600 was from a money market account 3. This gain is from equipment that XY2 purchased in February and sold in December (le, it does not qualify as 51231 gain) 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation), 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers) 6.XYZ actually wrote off $31.000 of its accounts receivable as uncollectible 7. Tax depreciation was $2.100,000 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers 9.XYZ mode $500,000 of cash contributions to qualified charities during the year. The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation 10. On July 1 of this year XYZ acquired the assets of another business. In the process it acquired $324,000 of goodwill. At the end of the year, XYZ wrote off $34,000 of the goodwill os impaired 11 XYZ expensed all of its organizational expenditures for book purposes XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes 12. The other expenses do not contain any items with book-tax differences 13. This is an estimated tax provision (federal tax expense) for the year Assume that XYZ is not subject to state income taxes Estimated tax information XYZ mode four equal estimated tax payments tooling $414,000 ($100,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2020 and that in 2020 it reported a tax liability of $556,000 During 2021 XYZ determined its taxable income at the end of each of the four quarters as follows: Quarter-end First Second Third Cumulative table inco (los) 489,000 $ 1,140,000 $ 1,450,000 Estimated tax information XYZ made four equal estimated tox payments totaling $414,000 ($100,000 per quarter). For purposes of estimated fox liabilities, assume XYZ was in existence in 2020 and that in 2020 it reported a tax liability of $556,000. During 2021 XYZ determined its taxable income at the end of each of the four quarters as follows: Cumulative taxable Quarter end incon (los) First $ 480,000 Second $1,140,000 Third $ 1,480,000 Finally, assume thot XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) o. Compute XYZ's taxable income. b. Compute XYZ's income tax liability Tax liability Muon Schedule M1 Schedule MI Schedule M. 1 Reconciliation of income (Loss) per Books With Income per Return Note. The corporation may be required to file Schedule M3 See instructions 1 Mal income per books Incorecorded by not 2 Federal income tax per books Included on this retum 3. Excess of capital capital gains mp ile out Income subject to tax not recorded on books Disyem.) O Dedon not chard 5 Expenses recorded on bola this year not deducted on this matum against book income Depreciation Deprecat Chable contin Charitate into Traw and wartainment Other Other (Ham) OS Anand Stooption companion incantato Badtexte Warranty pe Goodwinment Orgonal expenditures 6 de Brough Dom 1 2 3 THIS FORMISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELE, DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2001 Merci