Question

Kristi Corporation, a calendar-year, accrual-basis corporation had net income per the books of $850,000 for the current year. Included in this number were the following items: Federal income taxes $200,000 Interest income on U.S. treasury bonds 26,000 Interest income on municipal bonds 22,000 Charitable contribution in excess of 10% limitation 4,000 Tax penalty assessed by IRS 1,000 Capital loss on sale of land (no other capital asset sales) 3,000 Business entertainment expense 20,000 MACRS depreciation in excess of book depreciation is $5,000. Calculate Kristi Corporation's taxable income before special deductions for the current year.

Answer 1

Taxable income before special deductions = $1,051,000

Step-by-step explanation:

Particulars Amount($) Amount($)

Income as per books of accounts 850,000

Add: Income tax 200,000

Charitable Contribution excess of 4,000

10% limit

Tax penalty assessed by IRS 1,000

Capital loss on sale of land 3,000

Business entertainment expense 20,000 228,000

1,078,000

Less: Interest income on municipal (22,000)

bonds

MACRS depreciation in excess of (5,000) (27,000)

book depreciation

Taxable income before special deductions 1,051,000