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Problem 5-28 (LO. 1, 2) In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount
Problem 5-28 (LO. 1, 2) | ||||
In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) in each as a result of the transaction. | ||||
Assume that E & P has already been increased by taxable income. | ||||
Enter a decrease as a negative number by using the minus sign. If there is no effect, enter "0". | ||||
Taxable Income | E & P | |||
Transaction | ||||
a. | Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized). | |||
b. | Mining exploration costs incurred on May 1 of current year; $24,000 is deductible from current-year taxable income. | |||
c. | Sale of equipment to unrelated third party for $240,000; basis is $120,000 (no election out of installment method; no payments are received in current year). | |||
d. | Dividends of $20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply). | |||
e. | Additional first-year (bonus) depreciation of $45,000 claimed in current year. | |||
f. | Section 179 expense deduction of $25,000 in current year. | |||
g. | Impact of current-year 179 expense deduction in succeeding year. | |||
h. | MACRS depreciation of $80,000. ADS depreciation would have been $90,000. | |||
i. | Federal income taxes of $80,000 paid in current year. |
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