With Puerto Rico Tax Laws:

1. Determine the net income (loss) before donations for the corporation as of December 31, 2020 using the table to reconcile the items presented in the statement of income and expenses, from a financial accounting basis to tax accounting.

Note 1 two 3rd 36 Distributors Valencia, Corp. Statement of Income and Expenses For the year ended December 31, 2020 Description Quantity Sales $ 13,500,000 Less: Cost of goods sold 4,500,000 Gross margin 9,000,000 Other income Dividends 15.000 Interests 12,000 Capital gain 40,000 Loss of capital (60,000) Gross income 9,007,000 Expenses Wages 5,375,000 Rent 1,200,000 Depreciation 400,000 140.000 Advertising 375,000 Payroll taxes 280,000 Repair and Maintenance 225,000 Donations 250,000 Professional services 130,000 Foods 40,000 Entertainment 25,000 Miscellaneous 15,000 Total expenditures 8.455,000 Net Income Before Tax 552,000 Provision of Income Tax 100.000 Net income S 452,000 4 5 6 Boat expense 7 8 4 Grades 1. The corporation owns 12% of the common stock of Sofi Industries, Inc., a corporation domestic of Puerto Rico 2. The $ 12,000 corresponds to the following types of interest: S 4,000 of government bonds of California, S 500 in bank account deposits, and $ 7,500 in Premium Corporation bonds, entity subject to the payment of income tax. 3. Capital assets: to. The corporation sold on August 15, 2020 an investment in XYZ common shares Corporation for S 120,000. The shares were purchased on March 18, 2015 by S 80.000 b. The corporation sold on November 23, 2020 an investment in government bonds of New York $ 70,000. The bonds were purchased on July 1, 2015 for $ 100.000 4. Salaries reported to the Department of the Treasury through withholding vouchers (W-2) It amounts to $ 5 million. Informed professional services amount to $ 130,000. 5. The monthly rent for the various facilities of the corporation totals $ 100,000. At December 31 In 2020, the corporation accumulated the income for the year on its books. However, the rent for the month of December was paid on March 30, 2021. 6. The equipment subject to depreciation has a cost of $ 5,000,000, useful life of 12.5 years, depreciation straight line. Depreciation claimed in prior years $ 800,000 7. The corporation owns a boat which they use occasionally to entertain their employees. and hold meetings with salespeople and company executives. 8. Donations were made to qualified non-profit entities. Additional Information 9. The corporation paid $ 125,000 of estimated income tax applicable to the taxable year 2020 10. The entity generated $ 1,900,000 of net operating loss in 2019. Note 1 two 3rd 36 Distributors Valencia, Corp. Statement of Income and Expenses For the year ended December 31, 2020 Description Quantity Sales $ 13,500,000 Less: Cost of goods sold 4,500,000 Gross margin 9,000,000 Other income Dividends 15.000 Interests 12,000 Capital gain 40,000 Loss of capital (60,000) Gross income 9,007,000 Expenses Wages 5,375,000 Rent 1,200,000 Depreciation 400,000 140.000 Advertising 375,000 Payroll taxes 280,000 Repair and Maintenance 225,000 Donations 250,000 Professional services 130,000 Foods 40,000 Entertainment 25,000 Miscellaneous 15,000 Total expenditures 8.455,000 Net Income Before Tax 552,000 Provision of Income Tax 100.000 Net income S 452,000 4 5 6 Boat expense 7 8 4 Grades 1. The corporation owns 12% of the common stock of Sofi Industries, Inc., a corporation domestic of Puerto Rico 2. The $ 12,000 corresponds to the following types of interest: S 4,000 of government bonds of California, S 500 in bank account deposits, and $ 7,500 in Premium Corporation bonds, entity subject to the payment of income tax. 3. Capital assets: to. The corporation sold on August 15, 2020 an investment in XYZ common shares Corporation for S 120,000. The shares were purchased on March 18, 2015 by S 80.000 b. The corporation sold on November 23, 2020 an investment in government bonds of New York $ 70,000. The bonds were purchased on July 1, 2015 for $ 100.000 4. Salaries reported to the Department of the Treasury through withholding vouchers (W-2) It amounts to $ 5 million. Informed professional services amount to $ 130,000. 5. The monthly rent for the various facilities of the corporation totals $ 100,000. At December 31 In 2020, the corporation accumulated the income for the year on its books. However, the rent for the month of December was paid on March 30, 2021. 6. The equipment subject to depreciation has a cost of $ 5,000,000, useful life of 12.5 years, depreciation straight line. Depreciation claimed in prior years $ 800,000 7. The corporation owns a boat which they use occasionally to entertain their employees. and hold meetings with salespeople and company executives. 8. Donations were made to qualified non-profit entities. Additional Information 9. The corporation paid $ 125,000 of estimated income tax applicable to the taxable year 2020 10. The entity generated $ 1,900,000 of net operating loss in 2019