Maxwell Corporation has income per books before tax of $400,000. Included in the income per books is

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Maxwell Corporation has income per books before tax of $400,000. Included in the income per books is $8,000 interest income from tax-exempt municipal bonds. In computing income per books, Maxwell deducted $22,000 for meals and entertainment expenses, $3,300 for premiums on officers’ life insurance policies

(the corporation is the beneficiary for these policies), and $200 for fines.

a. What is Maxwell Corporation’s taxable income?

b. What should Maxwell Corporation report as its income tax expense on its financial statements, assuming it uses a 34 percent tax rate?

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Taxation For Decision Makers 2008

ISBN: 9780324654110

2nd Edition

Authors: Shirley Dennis-Escoffier, Karen A. Fortin

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