In: Accounting
Please help clarify the steps to calculate corporate taxable income for the year based on the following financial information (book versus tax income). If any information is needed please ask before shutting down the question as incomplete.
Apex Corporation was incorporated on January 1, 2017. Here is the income & balance sheet statement for Apex Corp. for December 31, 2017.
Revenue from sales |
40,000,000 |
Cost of goods sold |
27,000,000 |
Gross profit |
13,000,000 |
Other income |
|
Income from investment in corporate stock |
300,000 |
Interest income |
20,000 |
Capital gains (losses) |
-4000 |
Gain or loss from disposition of fixed assets |
3,000 |
Miscellaneous income |
50,000 |
Gross income |
13,369,000 |
Expenses |
|
Compensation |
7,500,000 |
Stock option compensation |
200,000 |
Advertising |
1,350,000 |
Repairs and maintenance |
75,000 |
Rent |
22,000 |
Bad debt expense |
41,000 |
Depreciation |
1,400,000 |
Warranty expenses |
70,000 |
Charitable donations |
500,000 |
Meals |
18,000 |
Goodwill impairment |
30,000 |
Organizational expenditures |
44,000 |
Other expenses |
140,000 |
Total expenses |
11,390,000 |
Income before taxes |
1,979,000 |
Provision for income taxes |
720,000 |
Net income before taxes |
1,259,000 |
APEX Corporation Balance Sheet |
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January 1, 2017 (in $) |
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Assets |
|||||
Current Assets |
|||||
Cash |
580,000 |
||||
Investment in Bonds |
|||||
Accounts Receivable |
470,000 |
||||
Less Allowance for bad debts |
- |
||||
Accounts Receivable (net) |
470,000 |
||||
Inventory |
300,000 |
||||
Total Current Assets |
1,350,000 |
||||
Non Current Assets |
|||||
Fixed Assets |
21,170,000 |
||||
Less Accum. Depreciation |
- |
||||
Fixed Assets (net) |
21,170,000 |
||||
Life Insurance |
|||||
Investments in stocks |
10,050,000 |
||||
Goodwill |
120,000 |
||||
Total Noncurrent Assets |
31,340,000 |
||||
Total Assets |
32,690,000 |
||||
Liabilities and Shareholders' Equity |
|||||
Current Liabilities |
|||||
Accounts Payable |
370,000 |
||||
Reserve for Warranties |
800,000 |
||||
Total Current Liabilities |
1,170,000 |
||||
Non Current Liabilities |
|||||
Long -term debt |
19,000,000 |
||||
Deferred compensation |
- |
||||
Deferred tax Liabilities |
- |
||||
Total Non Current Liabilities |
19,000,000 |
||||
Total Liabilities |
20,170,000 |
||||
Shareholders’ Equity |
|||||
Common Stack ( $1 par value) |
5,000,000 |
||||
Additional Paid In Capital |
7,520,000 |
||||
retained earnings |
- |
||||
Total Shareholders’ Equity |
12,520,000 |
||||
Total Liabilities and Shareholders’ Equity |
32,690,000 |
Here are some other data:
From 2017 onwards corporate tax rate is considered as 21% flat rate
Steps to calculate corporate tax income:
Net income before taxes 1,25,90,000
Less : Compensation of Officers 25,00,000
Wages and Salaries 50,00,000
Bad debt written off 27,000
Charitable contributions 5,00,000
Depreciation 19,00,000
Goodwill written off 30,000
Dividend Recieved deduction 1,30,000
Other deductions 1,66,600
Corporate taxable amount 2,336,400
Corporate Tax rate 21%
Corporate tax liability 490,644