Problem 20-63 (LO. 4, 5)

Del Mar Corporation (EIN 33-1234567) was formed and began operations on January 1, 2018. The corporate address is 463 E. Pershing Blvd. Cheyenne, WY 82001. Del Mar uses the accrual basis of accounting. The corporations trial balance is presented below:

Trial Balance 12/31/2018
	General Ledger Account Balance
Account Name	Debit		Credit
Cash in checking	$25,000
Accounts receivable	20,000
Reserve for bad debts			$7,000
Inventory (at cost)	87,000
Investments	1,000
Organization expense	0
Equipment	90,000
Accumulated depreciation equipment			10,000
Land	0
Other intangible assets	4,000
Accounts payable			14,000
Accrued income taxes			(910)
Accrued interest			3,400
Notes payable			85,000
Common stock			80,000
Additional paid-in capital			0
Retained earnings			0
Revenues			260,000
Sales returns and allowances	0
Investment income			20,000
Gain (loss) on sale of assets	0		0
Purchase returns and allowances			0
Cost of goods sold	105,000
Advertising	5,000
Amortization	0
Bad debt expense	7,000
Charitable contributions	0
Depreciation	10,000
Dues and subscriptions	0
Interest expense	3,400
Miscellaneous	0
Payroll taxes	10,000
Professional fees	0
Repairs	3,000
Utilities	0
Wages	105,000
Income taxes	3,090
Totals	$478,490		$478,490
Difference			$0

Additional info:

• Investment income is dividends received from a 10% owned domestic corporation.
• Wages include $75,000 of compensation to Marion Ore, CEO and 100% owner of Del Mar Corp. Her Social Security number is 456-78-0123. She devotes 100% of her time to Del Mar Corp.
• Book depreciation was recorded to match tax depreciation.
• Del Mar Corp. made $4,000 of estimated tax payments during 2018. These were debited to the accrued income taxes account.
• The "Other intangible assets" are organizational costs. An election was made to expense the maximum amount of organization costs for tax.
• None of the bad debts were deemed fully worthless.

Compute taxable income and Federal tax liability for 2018.

If an amount is zero, enter "0".

Gross receipts or sales			$
Cost of goods sold
Investment income
Total gross income			$
Less Expenses:
Compensation of officers
Salaries and wages
Repairs and maintenance
Bad debts
Taxes and licenses
Interest
Depreciation/Amortization
Advertising
Taxable income before dividends received deduction			$
Dividends received deduction
Taxable income			$
Tax			$

and subscriptions 0 Interest expense 3,400 Miscellaneous 0 Payroll taxes 10,000 Professional fees 0 Repairs 3,000 Utilities 0 Wages 105,000 Income taxes 3,090 Totals $478,490 $478,490 Difference $0 Additional info: Investment income is dividends received from a 10% owned domestic corporation. Wages include $75,000 of compensation to Marion Ore, CEO and 100% owner of Del Mar Corp. Her Social Security number is 456-78-0123. She devotes 100% of her time to Del Mar Corp. Book depreciation was recorded to match tax depreciation. Del Mar Corp. made $4,000 of estimated tax payments during 2018. These were debited to the accrued income taxes account. The "Other intangible assets" are organizational costs. An election was made to expense the maximum amount of organization costs for tax. None of the bad debts were deemed fully worthless. Compute taxable income and Federal tax liability for 2018. If an amount is zero, enter "0". Gross receipts or sales $ Cost of goods sold Investment income Total gross income $ Less Expenses: Compensation of officers Salaries and wages Repairs and maintenance Bad debts Taxes and licenses Interest Depreciation/Amortization Advertising Taxable income before dividends received deduction $ Dividends received deduction Taxable income $ Tax $