Question

Madison Corporation reported taxable income of $400,000 in 20 X 3 and accrued federal income taxes of $136,000. Included in the computation of taxable income was regular depreciation of $200,000 (E&P depreciation is $60,000) and a net capital loss carryover of $20,000 from 20X2 utilized in 20X3. The corporation's current earnings and profits for 20X3 would be:

A. $424,000B. $404,000C. $380,000D. $344,000

Answer 1

A. $424,000

Step-by-step explanation:

current income = Taxable income - Federal tax + Depreciation disallowed + net capital loss carryover

= $400,000 - $136,000 + ($200,000 - $60,000) + $20,000

= $424000

Therefore, The corporation's current earnings and profits for 20X3 would be $424000.