Question
Identify the book-tax differences. Determine if each is permanent or temporary and favorable or unfavorable. Starting with net income, calculate taxable income (show your calculations)
Identify the book-tax differences.
Determine if each is permanent or temporary and favorable or unfavorable.
Starting with net income, calculate taxable income (show your calculations)
DEF Corporation
Income Statement
For the year ending December 31, 2023
Revenue:
Sales revenue $ 4,500,000
Less: Cost of Goods Sold $ (1,000,000)
Sales returns and allowances $ (1000)
Net Sales $ 3,499,000
Rent Revenue $ 5,000
Interest revenue:
Yellow Corp bonds $ 4,000
City of Belen bonds $ 3,000
Life insurance proceeds $ 500,000
Total Revenue $ 4,011,000
Expenses:
Rent $ 240,000
Utilities $ 55,000
Property taxes $ 40,000
Officers compensation $ 1,700,000
Salaries and wages $ 200,000
Insurance expense $ 50,000
Life insurance premiums $ 6,000
Bad debts expense $ 20,000
Depreciation expense $ 60,000
Fines $ 11,000
Meals $ 500
Entertainment $ 200
Total expenses $ 2,382,700
Pretax income $ 1,628,300
Provision for income taxes $ 500,000
Net income $ 1,128,300
1-Life insurance premiums and proceeds were for a policy (payable to DEF Corp) on the CFO who passed in November 2023
2-Officers compensation was for the five highest compensated officers of $1,200,000, $225,000, $125,000, $100,000, and $50,000. 3-$5,000 of 2023 accounts receivable was written off in 2023, the remainder is an estimate of what will not be collectible in 2024. 4-$100,000 of depreciation was deducted for federal tax purposes. 5-the foreign, federal and state provisions are $10,000, $450,000 and $40,000 respectively
Chapter 9 Book-Tax Differences Exercise 2 - Identify the book-tax differences. - Determine if each is Permanent or Temporary and Favorable or Unfavorable. - Starting with Net Income, calculate Taxable Income (show your calculations)Step by Step Solution
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