Question

Oakland Corporation reported a net operating loss of $500,000 in 20X3 and elected to carry the loss forward to 20X4. Not included in the computation was a disallowed meals and entertainment expense of $20,000, tax-exempt income of $10,000, and deferred gain on a current year transaction treated as an installment sale of $250,000. The corporation's current earnings and profits for 20X3 would be:

Answer 1

-260,000 current earings and profits

Step-by-step explanation:

From the taxable income we are going to adjust to get the current earnings and profits

-500,000 taxable income

-20,000 non-deductible expenses

+10,000 exempt taxes

+250,000 deferred gain

-260,000 current earings and profits