Woodland Corporation reports the following financial accounting results and other depreciation information for the current year:
Sales revenue ………………………………………………………….. $ 2,000,000
Plus: Interest income on municipal bonds ……………………………. 300,000
Minus: Depreciation for financial accounting purposes ……………… (92,000)
Other operating expenses ……………..……………..………………… (1,500,000)
Financial accounting net income before federal income taxes ……….. $ 708,000
Depreciation for:
For regular tax purposes ………………………………………………. $ 152,000
For AMT purposes ……………………………………………………. 114,000
Woodland’s sales revenue and other operating expenses are the same for financial accounting, regular tax, and AMT purposes. The municipal bonds are not private activity bonds and were not issued in 2009 or 2010. The depreciation pertains to $900,000 of property Woodland acquired and placed in service during the current year. Assume that Woodland is not exempt from the AMT and has zero deferred tax assets and liabilities at the beginning of the current year. Also assume that Woodland does not have to establish a valuation allowance for any of its deferred tax assets and that the enacted tax rate for all future years is 34%.
a. Determine Woodland’s regular taxable income, preadjustment AMTI, and ACE.
b. Determine Woodland’s regular tax and AMT.
c. Prepare the journal entry to record Woodland’s federal income tax expense, and determine Woodland’s financial accounting net income.