Question

Can someone explain to me what I did wrong as my net income doesnt equal taxable income. Or am i already correct?

Edit: Sorry if it wasnt clear. The question was to find the net income on the first picture based on the second pictures information. I have answered it and was wondering if someone could check if i did it correctly.

#### Homework Answers

Answer #1

Computation of A's taxable income

Particulars

net income per books \$104000

Add:

book depreciation in excess of allowable depreciation \$2000

accrued federal income tax \$35000

net capital loss \$4000

Less:

tax exempt interest \$5000

A's taxable income \$140000

Notes:

1. Federal income tax cannot be claimed as deduction in the calculation of net taxable income
2. the amount of depreciation in excess of allowable depreciation is not allowed as a deduction , hence \$2000 is added back
3. capital loss cannot be set off againt business income. capital loss can be set off against another capital gain. hence \$4000 is added back.
4. tax exempt interest is alraedy added in the net income . as we are required to calculate taxable income it is deducted from net income.
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