XYZ is a calendar-year corporation that began business on January 1, 2021. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6. XY? corporation Income statement for current year Book Income Revenue from sales $ 43,800,000 Cost of Goods sold (29,565,000) Gross profit $ 14,235,600 Other income: Income from investment in corporate stock 300,0001 Interest income 35,2002 Capital gains (lossen) (4,000) Gain or loss from disposition of fixed assets Miscellaneous income 50,000 Gross Income $ 14,619,200 Expenses: Compensation (7,538,000) Stock option compensation (238,000)5 Advertising (1,388,000) Repairs and Maintenance (94,000) Rent (41,000) Bad Debt expense (60,000,6 3,0003 9 Bad Debt expense Depreciation Warranty expenses Charitable donations Meals (all at restaurants) Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes (60,000) (1,875,000)? (108,000) (500,000) (21,800) (39,500) 10 (53,000, 11 (178.000 12 $12,134,300) $ 2,484,900 (400,000,13 $ 2,084,900 1. XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC's earnings. 2. Of the $35,200 Interest Income, $8,800 was from a City of Seattle bond, $10,800 was from a Tacoma City bond. $9.800 was from a fully taxable corporate bond, and the remaining $5,800 was from a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (ie, it does not qualify as 51231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of Incentive stock option compensation that was expensed during the year (recipients are officers). 6.XYZ actually wrote off $36,500 of its accounts receivable as uncollectible. 7. Tax depreciation was $2,375,000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $500,000 of cash contributions to qualified charities during the year . The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation. ASULLULIT MUUN MUCHO contributions for purposes of determining the charitable contribution limitation 10. On July 1 of this year XYZ acquired the assets of another business. In the process, it acquired $357.000 of goodwill. At the end of the year, XYZ wrote off $39,500 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences. 13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax information: XYZ made four equal estimated tax payments totaling $487,000 ($120,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2020 and that in 2020 it reported a tax liability of $668,000. During 2021, XYZ determined its taxable income at the end of each of the four quarters as follows: Quarter-end First Second Third Cumulative taxable income (lon) $ 590,000 $ 1,195,000 $ 1,660,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Comprehensive Problem 05-65 Part a (Algo) a. Compute XYZ's taxable income. EXHIBIT 16-6 Net Operating Loss Carryback and Carryover Summary Tax Year NOL Originated Carrybacks Carrybacks Beginning before 2018 Back two years."Can offset 100% of taxable income before the Forward 20 years Coffet 100% of the income herom the NOL deduction in carryback years. NOL deduction Curried forward indefinitely. Can offset up to 100 Beginning after 2017 and before 2021 Back tive years."Can offset up to 100% of taxable income before 2001. In tux years beginning after 2020, can het up to 80 income before the NOI. deduction in tax years beginning before the NOL deduction in carryback years. percent of taxable income her deducting NOI. came from NOLS originating in tax years beginning before 2011 Curried forward indefinitely an offset up to 10 percent of Beginning after 2020 Not allowed taxable income remaining efter deducing NOL.carrem NOLA originating in to your beginning before 2011 A corporation can elect to forgo the NOL carryback and simply carry the NOL. forward to funere years. Also, if a corporation carries hacka NOL, mas carry the theorier fra prior or five years prior, depending on the year the NOL originated)