Micro, an accrual basis corporation, reported $525,100 net income before tax on its financial statements prepared in accordance with GAAP. Micros records reveal the following information: Micro paid $29,000 in legal fees and $58,000 to a former employee to settle a claim of sexual harassment. To avoid negative publicity, Micro insisted that the settlement include a confidentiality agreement. Late in the year, Micro entered into a five-year licensing agreement with an unrelated firm. The agreement entitles the firm to use a Micro trade name in marketing its own product. In return, the firm will pay Micro an annual royalty of 1 percent of gross revenues from sales of the product. The firm paid a $80,000 advanced royalty to Micro on the day the agreement was finalized. For financial statement purposes, this prepayment was credited to an unearned revenue account. At its final meeting for the year, Micros board of directors authorized a $17,500 salary bonus for the corporations president to reward him for an outstanding performance. Micro paid the bonus on January 12. The president doesnt own enough Micro stock to make him a related party for federal tax purposes. Micro was incorporated last year. On its first tax return, it reported a $23,400 net operating loss.

Answer is complete but not entirely correct.

Micros net book income before tax	$525,100selected answer correct
Sexual harassment settlement and legal fees	87,000selected answer correct
Prepaid royalty income	(64,000)WRONG
Accrued bonus expense	0selected answer correct
NOL carryforward deduction	(23,400)selected answer correct
Micros taxable income	$524,700