Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which...

Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which it holds a 10% interest. Cardinal also receives interest income of $35,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a library.) Cardinal borrowed funds to purchase the municipal bonds and pays $20,000 of interest on the loan. Excluding these three items, Cardinal's taxable income is $500,000. Cardinal has $150,000 of accumulated E & P at the end of the prior year, and it paid Federal income taxes of $131,250 during the year.

Click here for the Dividend Received Deduction Table.

a. After these three items are taken into account, Cardinal Corporation's taxable income is $.

Feedback

b. Cardinal Corporation's accumulated E & P at the start of next year is $

Expert Solution

Answer :

a. Cardinal Corporation's taxable income is $575,000.

b. Cardinal Corporation's accumulated E & P at the start of next year is $783,750

Particulars	Amount	Amount
a. Calculation of taxable income :
Income excluding dividends		$500,000
Dividend received	$250,000
Less: Dividend received deduction (250,000 × 0.70)	(175,000)	75,000
Taxable income		$575,000

b. Calculation of accumulated E & P :
E & P beginning balance		$150,000
Add:
Taxable income	$575,000
Dividend received deduction	175,000
Interest income from muncipal bonds	35,000	785,000
Less:
Interest paid on loan	(20,000)	(20,000)
Current E & P		$915,000
Less : Federal taxes paid		(131,250)
E & P balane accumulated balance at start of next year		$783,750

Note : Interest received from muncipal bonds are not taxable.

ekkarill92 answered 2 years ago

Problem 5-25 (LO. 1, 2) Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000...

Problem 5-25 (LO. 1, 2) Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which it holds a 10% interest. Cardinal also receives interest income of $35,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a library.) Cardinal borrowed funds to purchase the municipal bonds and pays $20,000 of interest on the loan. Excluding these three items, Cardinal's taxable income is $500,000. Cardinal has $150,000 of accumulated E...

1. ABC Corporation receives $10,000 dividend income from its equity investment in DEF Corporation. ABC is...

1. ABC Corporation receives $10,000 dividend income from its equity investment in DEF Corporation. ABC is in the 34% marginal tax bracket. The tax on dividend income would amount to: a. $900 b. $3,000 c. $1,020 d. $3,400 2. ABC Corporation’s revenue from sales is $250,000; its COGS is $100,000; its SG&A is $50,000; its interest expense is $20,000; it pays $20,000 as cash dividends. How much is the firm’s income taxes? (Corporate marginal tax rate is $0-50,000: 15%; $50,000-75,000:...

On December 10 of the current year, Gonzalez Corporation (a calendar-year taxpayer) accrues an obligation for...

On December 10 of the current year, Gonzalez Corporation (a calendar-year taxpayer) accrues an obligation for a $125,000 bonus to Latasha, a sales representative who had had an outstanding year. Latasha owns no Gonzalez Corporation stock. The bonus is paid on May 5 of the next year. What is Gonzalez's deduction for the current year? What is Gonzalez's deduction for next year? Explain you answer.

Purple Corporation, an exterminating company, is a calendar year taxpayer. It contracts to provide service to...

Purple Corporation, an exterminating company, is a calendar year taxpayer. It contracts to provide service to homeowners once a month under a one-, two-, or three-year contract. On April 1 of the current year, the company sold a customer a one-year contract for $120. How much of the $120 is taxable in the current year if the company is an accrual basis taxpayer. If the $120 is payment on a two-year contract, how much is taxed in the year the...

Oliver, a calendar-year taxpayer, owns 50 shares of Copper Corporation stock, which was purchased two years...

Oliver, a calendar-year taxpayer, owns 50 shares of Copper Corporation stock, which was purchased two years ago for $30,000. Oliver sells all 50 shares on December 31, of the current year (2019), for $20,000 and on January 15 (2020), of the following year, purchases 25 shares of Copper Corporation stock. Oliver's recognized loss will be (LABEL AND SHOW ALL WORK WITH CALCULATIONS) A) $0 B) $5,000. C) $7,500. D) $10,000.

On August 1, 2012, all of the outstanding stock of Bridge Corporation (a calendar year taxpayer)...

On August 1, 2012, all of the outstanding stock of Bridge Corporation (a calendar year taxpayer) was purchased from an unrelated party for cash by Infrastructure Corporation. On July 1, 2015, Bridge adopted a resolution providing for a plan to completely liquidate. The plan of complete liquidation provided that Bridge would be liquidated upon payment of its indebtedness to a large, publicly held lender, but in any event not later than March, 2018. Bridge’s loan agreement had been entered into...

11. On January 1, Tulip Corporation (a calendar year taxpayer) has accumulated E & P of...

11. On January 1, Tulip Corporation (a calendar year taxpayer) has accumulated E & P of $300,000. Its current E & P for the year is $90,000 (before considering dividend distributions). During the year, Tulip distributes $600,000 ($300,000 each) to its equal shareholders, Anne and Tom. Anne has a basis in her stock of $65,000, and Tom’s basis is $120,000. What is the effect of the distribution by Tulip Corporation on Anne and Tom?

On January 1, Tulip Corporation (a calendar year taxpayer) has accumulated E & P of $400,000....

On January 1, Tulip Corporation (a calendar year taxpayer) has accumulated E & P of $400,000. Its current E & P for the year is $120,000 (before considering dividend distributions). On the last day of the year, Tulip distributes $600,000 ($150,000 each) to its four equal shareholders, Anne, Andrew, Tom and Terry. Anne has a basis in her stock of $65,000, while Andrew’s basis is $120,000. Tom has a $5,000 basis in his stick while Terry has a $80,000 basis....

1) Bailey, a single taxpayer, obtains permission to change from a calendar year to a fiscal...

1) Bailey, a single taxpayer, obtains permission to change from a calendar year to a fiscal year ending June 30, 2019. During the six months ending June 30, 2019, she earns $40,000 and has $8,000 of itemized deductions. What is the amount of her annualized income? $32,000 $28,000 $64,000 $56,000 2) Ashley owns an unincorporated manufacturing business. In 2019, she purchases and places in service $2,650,000 of qualifying five-year equipment for use in her business. Her taxable income from the...

A 59 year-old calendar year individual taxpayer purchased an annuity from an insurance company for $100,000...

A 59 year-old calendar year individual taxpayer purchased an annuity from an insurance company for $100,000 in 2019. The terms of the annuity were that the company would pay him $5,000 a year to T for the rest of T’s life. How much income will he include in his personal income tax return as a result of receiving the $5,000 payment in 2020? _____________ In 2050? ______________

Question