The GDK Corporation is using a calendar year for its financial statements and follows the accrual system of accounting.

For the year 12-31-2021 the following information is provided for the corporation’s income tax:

The corporation recognized $1,668,000 gross receipts from accounting fees. In addition, it earned $24,200 interest income from investments in marketable securities (short term investments) resulting in total income for the year of $1,688,000. The corporation’s net operating loss carry-forward amounts to $13,400. The corporation also has refundable credits of 140,000.

The corporation had paid $ 100,000 to local charities. However, the deduction for charitable contributions is limited to 10% of gross receipts less deductions and loss carry-forward.

The corporation’s other deductible operating expenses include:

Compensation of officers $ 80,000

Employee salaries and wages $ 510,200

Repairs and maintenance $ 33,800

Rents 86,600

Bad debts 100,000

Taxes and licenses 49,500

Depreciation 85,200

Advertising 24,400

Other deductions 81,300

Required:

1) Calculate the corporation’s taxable income

2) Determine the corporation’s tax for the year using the following table: In addition, determine the tax amount owed or refund that the corporation is to receive.

Taxable income of:	Tax rate is:
Not over $50,000	15% of taxable income
Over 50,000 but not over 75,000
Over 75,000 but not over 100,000	13,750 + 34% of the excess over 75,000
Over 100,000 but not over 335,000	22,250 + 39% in excess of 100,000
Over 335,000 but not over 10,000,000	113,900 + 34% in excess of 335,000
Over 10,000,000 but not over 15,000,000	3,400,000 + 35% in excess of 10,000,000
Over 15,000,000 but not over 18,333,333	5,150,000 + 38% in excess of 15,000,000
Over 18,333,333	6,416,667 + 35% in excess of 18,333,333

Answer:

1) Calculation of Taxable Income

Step 1 Calculation of Total Income

2) Determine the corporation’s tax for the year.

Step 2 Calculation of total deductions (Calculation of charitable contributions)

Step 3 Calculation of net income before loss carry-forward

Step 4 Calculation of taxable income

Step 5 Calculation of tax

Tax table

Taxable income of: Tax rate is:

Not over $50,000 15% of taxable income

Over 50,000 but not over 75,000 7,500 + 25% over 50,000

Over 75,000 but not over 100,000 13,750 + 34% of the excess over 75,000

Over 100,000 but not over 335,000 22,250 + 39% in excess of 100,000

Over 335,000 but not over 10,000,000 113,900 + 34% in excess of 335,000

3) Determine the corporation’s amount owed or refund due.