Question

Boilermaker Inc. reported taxable income of $500,000 this year and paid federal income taxes of $105,000. Not included in the company’s computation of taxable income is tax-exempt income of $20,000, disallowed meals expense of $18,000, entertainment expenses of $12,000, and disallowed expenses related to the tax-exempt income of $1,000. Boilermaker deducted depreciation of $100,000 on its tax return. Under the alternative (E&P) depreciation method, the deduction would have been $60,000. Compute the company’s current E&P

Answer 1

Current E& P $424,000

Step-by-step explanation:

Taxable income $500,000

Add tax except interest $20,000

Excess of regular tax deprecation over E&P depreciation $40,000

Subtract:Federal income taxes(105,000)

Nondeductible meals and entertainment

( $18,000+$12,000) $30,000

Disallowed expenses related to tax-exempt income( 1,000)

Current E& P $424,000