Question

Grand River Corporation reported taxable income of $400,000 in year 1 and paid federal income taxes of $160,000. Not included in the computation was a disallowed meals expense of $3,100, tax-exempt income of $2,100, and deferred gain on an installment sale from a prior year of $36,000. The corporation's current earnings and profits for year 1 would be:

Answer 1

Answer: $275,000

Step-by-step explanation:

Earnings and Profit for the year:

= Taxable income - Federal income taxes - Disallowed meals expense + Tax exempt income + Deferred gain

= 400,000 - 160,000 - 3,100 + 2,100 + 36,000

= $275,000