Question

Campbell Corporation, an accrual basis calendar year corporation, had income of $450,000 for financial statement purposes in year 7. This amount included book depreciation of $50,000. The related tax depreciation was $65,000. Further, the financial statements reported $100,000 of municipal bond interest income, an expense of $2,000 for life insurance premiums on the corporation's president, charitable contributions of $5,000, excess capital losses over capital gains of $3,000, income tax penalties of $10,000, state income tax of $40,000, and Federal income tax expense of $175,000. What is the amount of Campbell's taxable income for year 7

Answer 1

The amount of Campbell's taxable income for year 7 is $525,000

Step-by-step explanation:

Accrual basis income $450,000

Less: Excess depreciation as per ($15,000)

tax purpose ($65,000 - $50,000)

Less: Interest income ($100,000)

Add: Federal income tax expense $175,000

Add: Excess capital loss over capital gain $3,000

Add: LIC on corporation president $2,000

Add: Income tax penalties (not allowed) $10,000

Taxable Income $525,000