The CL Corporation is organized in North Carolina, and it operates in several of the southern US states CL is owned by a small group of private equity investors It provides artistic services on a contract basis, e g , doing set design for films, plays, and operas, and processing digital information for film productions CL follows GAAP, and it is required to file a Schedule M 3 with its annual Form 1120 CL holds no net operating loss (NOL) carryovers Corporate policy is not to incur income tax underpayment penalties CLs CFO has asked for your assistance in generating information needed for the corporations financial statements The financial accounting records of CL for the current year produce the following abbreviated trial balance Other information is available from last years tax file and supporting records Follow all the public company disclosure rules of ASC 740, without regard to materiality or significance Use the format attached at the end when computing your answers to the following question Your colleagues in the audit department took the trial balance amounts and first computed the current state income taxes payable as $225, and the federal income tax payable as $500 Complete the construction of the trial balance Information from CL Files (all $K) CL reported per GAAP sales revenue of $11, 000 and CGS of $7,400 CL recorded an expense of $1,000 for its defined benefit retirement plans, but only $750 of this amount qualified for an income tax deduction in the current year The interest income was received from bonds issued by ExxonMobil ($30) and the City of Charleston ($12) The Deferred Revenue account was established because CL received full payment last year on a contract for services, one half of which CL performed this year, and one half of which it will perform next year CL elected a tax deferral of this gross income under RevProc 2004 34 CL holds life insurance policies on its five officers Activity concerning these policies this year included the following Proceeds collected, death of CIO $1,000 Premiums paid, all policies 670 Increase in cash value, all policies 120 CL sold some of its investment land, held as a capital asset at a $15 loss CLs tax department reported a $44 total of documented expenses for meals CL truck drivers were responsible for $10 in speeding tickets, all of which the company paid during the current year CL donated $14 to the United Way and had a carryover of $5 from last year CL recorded $ 42 in depreciation expense and has computed $67 for tax purposes CL accrued a current year tax expense of $500 federal and $225 state Statutory tax rates for CL are 21 federal and 8 for the states (blended) Unless otherwise noted, state income tax laws conform with the federal income tax provisions in all states in which CL has nexus None of the states with which CL has nexus allows a deduction for book federal income tax expense There are no enacted state or federal income tax rate changes that apply to CL CL anticipates no need for a valuation allowance relative to its tax deferrals Other balance sheet data follows Item Beginning of year balance End of Year balance A Book Bad Debt Allowance 110 125 B Cumulative Unicap Adjustment 40 75 CL Corporation Balance Sheet (Summary ($000) End of Current Year, before pending computations ASSETS Cash $ 1,500 Accounts receivable 1,100 Inventories 1,400 Property, plant equipment, net of depreciation 2,000 Investment land 2,550 Notes receivable, long term 210 Deferred tax assets 40 All other assets 2,750 Total $ 11,550 LIABILITIES and SHAREHOLDERS EQUITY Accounts payable $ 250 Taxes payable 725 Deferred revenues 200 Accrued pension liabilities 3,250 Notes payable, current 175 Notes payable, long term 1,505 Deferred tax liabilities 65 Common stock 1,000 Retained earning 4,380 Total $11,550 Determine CLs total tax provision for the year (i e , the tax accrual) Take the amounts that you derived in the trial balance, and from the tax payables given in item 3 above, to make this computation Hint Compute the state provision first Using the tax provision amount, compute the corporations effective tax rate to be reported to management

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The CL Corporation is organized in North Carolina, and it operates in several of the southern US states. CL is owned by a small group

The CL Corporation is organized in North Carolina, and it operates in several of the southern US states. CL is owned by a small group of private equity investors. It provides artistic services on a contract basis, e.g., doing set design for films, plays, and operas, and processing digital information for film productions. CL follows GAAP, and it is required to file a Schedule M-3 with its annual Form 1120. CL holds no net operating loss (NOL) carryovers. Corporate policy is not to incur income tax underpayment penalties.

CLs CFO has asked for your assistance in generating information needed for the corporations financial statements. The financial accounting records of CL for the current year produce the following abbreviated trial balance. Other information is available from last years tax file and supporting records. Follow all the public company disclosure rules of ASC 740, without regard to materiality or significance. Use the format attached at the end when computing your answers to the following question

Your colleagues in the audit department took the trial balance amounts and first computed the current state income taxes payable as $225, and the federal income tax payable as $500. Complete the construction of the trial balance.

Information from CL Files (all $K)

CL reported per GAAP sales revenue of $11, 000 and CGS of $7,400
CL recorded an expense of $1,000 for its defined benefit retirement plans, but only $750 of this amount qualified for an income tax deduction in the current year.
The interest income was received from bonds issued by ExxonMobil ($30) and the City of Charleston ($12).
The Deferred Revenue account was established because CL received full payment last year on a contract for services, one half of which CL performed this year, and one half of which it will perform next year. CL elected a tax deferral of this gross income under RevProc 2004-34.
CL holds life insurance policies on its five officers. Activity concerning these policies this year included the following:

Proceeds collected, death of CIO	$1,000
Premiums paid, all policies	670
Increase in cash value, all policies	120

CL sold some of its investment land, held as a capital asset at a $15 loss.
CLs tax department reported a $44 total of documented expenses for meals.
CL truck drivers were responsible for $10 in speeding tickets, all of which the company paid during the current year.
CL donated $14 to the United Way and had a carryover of $5 from last year.
CL recorded $ 42 in depreciation expense and has computed $67 for tax purposes
CL accrued a current-year tax expense of $500 federal and $225 state.
Statutory tax rates for CL are 21% federal and 8% for the states (blended). Unless otherwise noted, state income tax laws conform with the federal income tax provisions in all states in which CL has nexus. None of the states with which CL has nexus allows a deduction for book federal income tax expense.
There are no enacted state or federal income tax rate changes that apply to CL.
CL anticipates no need for a valuation allowance relative to its tax deferrals.
Other balance sheet data follows:

Item

Beginning

of year balance

End of

Year balance

Book Bad Debt Allowance

110

125

Cumulative Unicap Adjustment

CL Corporation

Balance Sheet (Summary ($000)

End of Current Year, before pending computations

ASSETS
Cash	$ 1,500
Accounts receivable	1,100
Inventories	1,400
Property, plant & equipment, net of depreciation	2,000
Investment land	2,550
Notes receivable, long term	210
Deferred tax assets	40
All other assets	2,750
Total	$ 11,550

LIABILITIES and SHAREHOLDERS EQUITY
Accounts payable	$ 250
Taxes payable	725
Deferred revenues	200
Accrued pension liabilities	3,250
Notes payable, current	175
Notes payable, long-term	1,505
Deferred tax liabilities	65

Common stock	1,000
Retained earning	4,380
Total	$11,550

Determine CLs total tax provision for the year (i.e., the tax accrual). Take the amounts that you derived in the trial balance, and from the tax payables given in item 3 above, to make this computation. Hint: Compute the state provision first. Using the tax provision amount, compute the corporations effective tax rate to be reported to management.