In: Accounting
During 2017, Thrasher (a calendar year, accrual basis S corporation) has the following transactions:
Sales $1,500,000
Cost of goods sold 900,000
Long-term capital gain 11,000
Short-term capital gain 5,000
Salaries 210,000
Qualified dividends from stock investments 30,000
Rent expense 170,000
Advertising expense 20,000
Interest expense on business loan 15,000
§ 1231 gain 25,000
Organizational expenditures 3,000
Charitable contributions 5,000
Bad debt (trade account receivable deemed to be uncollectible) 10,000
Cash dividend distributed to shareholders 120,000
Determine Thrasher’s taxable income for 2017.
Thrasher’s taxable income for 2017 | ||
Income from Business | Amounts | Amounts |
Sales | 15,00,000 | |
Less: Cost of goods sold | (90,000.00) | |
Less: Rent Expense | (1,70,000.00) | |
Less: Advertising Expense | (20,000.00) | |
Less: Interest Expense on Business Loan | (15,000.00) | |
Less: Salaries | (2,10,000.00) | |
Less: Organisational Expense | (3,000.00) | |
Less: Bad Debts | (10,000.00) | |
Income from Business (a) | 9,82,000.00 | |
Incom from Capital Gain | ||
Short Term Capital Gain | 11,000 | |
Incom from Capital Gain(b) | 11,000.00 | |
Income from Other Sources | ||
§ 1231 gain | 25,000 | |
Income from Other Sources(c) | 25,000.00 | |
Taxable Income= a+b+c | 10,18,000.00 | |
Notes: | ||
1. Dividend Income is exempt from Taxation. | ||
2. Bad Debt is assumed to be written off therefore allowed as deduction under Business income. | ||
3. Dividend Distribution tax is paid on the Dividend distributed to Shareholders. | ||
4. § 1231 gain- this being not clear so assumed to be income from other sources. | ||
5. Charitable contribution is not an allowable deduction under business income. | ||
6. Long term Capital gain is exempt under section 10(38) assuming this is on sale of shares. |