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Permtemp Corporation formed in 2012 and, for that year, reported the following book

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C:3-65 Permtemp Corporation formed in 2012 and, for that year, reported the following book income statement and balance sheet, excluding the federal income taxexpense, deferred tax assets, and deferred tax liabilities;Sales $20,000,000;Cost of goods sold (15,000,000);Gross profit $ 5,000,000;Dividend income 50,000;Tax-exempt interest income 15,000;Total income $ 5,065,000;Expenses;Depreciation $ 800,000;Bad debts 400,000;Charitable contributions 100,000;Interest 475,000;Meals and entertainment 45,000;Other 3,855,000;Total expenses) (5,675,000);Net loss before federal income taxes $ (610,000);Cash $ 500,000;Accounts receivable $ 2,000,000;Allowance for doubtful accounts) (250,000) 1,750,000;Inventory 4,000,000;Fixed assets $10,000,000;Accumulated depreciation) (800,000) 9,200,000;Investment in corporate stock 1,000,000;Investment in tax-exempt bonds 50,000;Total assets 16,500,000;Accounts payable $2,610,000;Long-term debt 8,500,000;Common stock 6,000,000;Retained earnings (610,000);Total liabilities and equity;Additional information for 2012;? The investment in corporate stock is comprised of less-than-20%-owned corporations.;? Depreciation for tax purposes is $1.4 million under MACRS.;? Bad debt expense for tax purposes is $150,000 under the direct writeoff method.;? Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary.. Qualified production activities income is zero.;For 2013, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities;Sales $33,000,000;Cost of goods sold (22,000,000);Gross profit $11,000,000;Dividend income 55,000;Tax-exempt interest income 15,000;Total income $11,070,000;Expenses;Depreciation $ 800,000;Bad debts 625,000;Charitable contributions 40,000;Interest 455,000;Meals and entertainment 60,000;Other 4,675,000;Total expenses (6,655,000);Net income before federal income taxes 4,415,000;Cash $ 2,125,000;Accounts receivable $ 3,300,000;Allowance for doubtful accounts (450,000) 2,850,000;Inventory 6,000,000;Fixed assets $10,000,000;Accumulated depreciation (1,600,000) 8,400,000;Investment in corporate stock 1,000,000;Investment in tax-exempt bonds 50,000;Total assets 20,425,000;Accounts payable $ 2,120,000;Long-term debt 8,500,000;Common stock 6,000,000;Retained earnings 3,805,000;Additional information for 2013;? Depreciation for tax purposes is $2.45 million under MACRS.;? Bad debt expense for tax purposes is $425,000 under the direct writeoff method.;? Qualified production activities income is $3 million.;Required for 2013;a. Prepare page 1 of the 2009 Form 1120, computing the corporation?s taxable income;and tax liability.;c. Prepare the 2009 Schedule M-3 for Form 1120.

 

Paper#18824 | Written in 18-Jul-2015

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