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 |
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