question 23

G Corporation, a calendar year accrual basis corporation, reported $5 million of net income after tax on its current year financial statements prepared in accordance with GAAP. In addition, the following information is available from G's books and records: Federal income tax expense per books was $1.5 million Gincurred $30,000 of meals and $25,000 of entertainment expenses. Assume for tax purposes that the meal costs are 50% deductible and that the entertainment costs are not deductible. . G sold two pieces of equipment used in its business for total sales proceeds of $400,000. The equipment's original cost was $2 million Book depreciation prior to sale totaled $1.2 million, tax depreciation totaled $1.5 million Guses the reserve method of accounting for bad debts. Additions to the reserve during the year totaled $400,000. Accounts receivable actually written off during the year totaled $450,000 G's depreciation expense for book purposes totaled $900,000. Tax depreciation computed under MACRS is $1.25 million Compute G's tax liability assuming a 21% corporate tax rate applies