Question

[27] For the current year, accrual basis Corp. A's books and records reflected the following: Net income per books $104,000 Accrued federal income tax 35,000 Net capital loss 4,000 Tax-exempt interest 5,000 Book depreciation in excess of allowable tax depreciation 2,000 Based on the above facts, what is the amount of A's taxable income? A. $69,000 B. $70,000 C. $140,000 D. $150,000 The correct answer is C. A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital loss and excess book depreciation must be added back, and tax-exempt interest income must be subtracted. B. Federal income taxes are not subtracted; they are added back to book net income. C. Federal income tax, excess capital losses, and book depreciation in excess of tax depreciation are not deductible. These amounts must be added back to book income Tax- exempt interest is not taxable and must be subtracted from book income. These adjustments are done on Schedule M-1 of the corporation tax return Net income per books $104,000 Add back: Federal income tax 35,000 Net capital loss 4,000 Excess book depreciation 2,000 $145,000 Subtract: Tax-exempt interest (5,000) Taxable income $140,000 D. The tax-exempt interest is not added back; it is subtracted from book net income.

Please Create An Income Statement based on this question.

Answer 1

Income Statement $ 140,000 Sales Revenue cost of goods sold Guoss puolit - $0 $ 140,000 operating expenses Pep €хр $ 2000 operating income - $138,000 Other Revenue (loss) Net capital loss Interest Revenue - - ($4000) $5000 Income Betae takes - $139,000 Income Tax expense - ($35,000) Net Income - $1041000