Question

In: Accounting

28. The following information is taken from Lynnso Corporation’s records for 2014: Gross receipts from operations....

28. The following information is taken from Lynnso Corporation’s records for 2014:

Gross receipts from operations. $500,000

Dividends received from a 40 percent owned domestic corporation. 100,000

Interest on State of Ohio bonds. 30,000

Life insurance proceeds received due to death of a key employee40,000

Cost of goods sold200,000

NOL carryover from 2013 13,000

MACRS depreciation (straight-line would have been $30,000) on equipment. 43,000

Straight-line depreciation on building. 15,870

Charitable contributions. 45,000

Wages expense. 50,000

Life insurance premiums on key-man insurance. 10,000

a. Determine Lynnso Corporation’s taxable income for 2014.

b. Compute Lynnso Corporation’s current E&P for 2014.

Solutions

Expert Solution

a) Lynnso Corporation’s taxable income for 2014

Gross receipts from operations

 $500,000

Less: Cost of goods sold

 $ 200,000

Gross profit

 $ 300,000

Add- Dividends received

 $ 100,000
$400,000
Less: Operating expenses:
Depreciation expense = 58,870
Wages Expense = 50,000		 108,870
291,130
Less: NOL carryover 13,000
278130
Less: Charitable contribution deduction (limited to10% of $278,130) 27,813
250,317
Less: Dividends-received deduction (80%) 80,000
Taxable Income 170,317

b) Lynnso Corporation’s current E&P for 2014

Taxable income $170,317
Add:
Tax-exempt interest $ 30,000
Life insurance proceeds $ 40,000
Dividends-received deduction $ 80000
NOL carryover $ 13,000
Excess depreciation $ 13,000 $ 176,000
$346,317
Deduct:
Federal income taxes 49,674
Excess charitable contribution 17,187
Life insurance premiums 10,000 $ 76,861
Current E&P $269,456

ekkarill92 answered 1 year ago
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