A corporation books, which are maintained using the accrual method, show the following income and expense item for 2016 tax year:
|Gross sales and receipts||$800,000|
|Returns and allowances||2,000|
|Cost of goods sold||200,000|
|Taxable interest income||20,000|
|Office rent expense||50,000|
|Salaries and wages expense||300,000|
|Miscellaneous business expenses||75,000|
|School tuition paid for major shareholder's son's education||10,000|
|New Truck purchased||25,000|
|Depreciation for new truck||5,000|
a. Determine the corporation's taxable income for the 2016 tax year. (The charitable company does not qualify to take the domestic production activities deduction.)
b. What is the amount of the corporation's charitable contributions carryover (if any)?
Taxable income refers to the income on which income tax will be levied. The taxable income of a company for an individual taxpayer is calculated by deducting the deductions from the annual gross income.
Answer and Explanation: 1
Computation of Corporation Taxable Income
|Gross sales and receipts||800,000|
|Less Return & Allowances||2,000|
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fromChapter 3 / Lesson 5
Learn what income tax liability is. Find out what taxable and adjusted gross income are, discover how to calculate tax liability, and examine common deductions.