Reference no: EM133106710
1. XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of income for the year. XYZ accounted for Its Investment in HC under the equity method, and It recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC's earnings.
2. Of the $27,200 Interest income, $6,800 was from a City of Seattle bond, $8,800 was from a Tacoma City bond, $7,800 was from a fully taxable corporate bond, and the remaining $3,800 was from a money market account.
3. This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as §1231 gain).
4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation).
5. This amount Is the portion of incentive stock option compensation that was expensed during the year (recipients are officers).
6. XYZ actually wrote off $31,500 of its accounts receivable as uncollectible.
7. Tax depreciation was $2,125,000.
8. In the current year, XYZ did not make any actual payments on warranties it provided to customers.
9. XYZ made $500,000 of cash contributions to qualified charities during the year. The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation.
10. On July 1 of this year XYZ acquired the assets of another business. In the process, it acquired $327,000 of goodwill. At the end of the year, XYZ wrote off $34,500 of the goodwill as impaired.
11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes.
12. The other expenses do not contain any Items with book-tax differences.
13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes.
Below is the book tax differences for the transactions that have them.
Subtract 100,000 from total income for Income from investment in corporate stock
Subtract 27,200 interest income
Leave 3,000 in total income (from gain or loss from dissposition of fixed assets)
Cannot subtract stock option compensation as a deductable expense (218,000)
Can only subtract 18,500 as bad debt expense
Tax depreciation 2,125,000
Cannot subtract any warrenty expense for Tax deductions
Meals expense = 0
Can only subtract 23,600 for goodwill impairment
Only subtract 7,800 for organization expenditures (immediate 5,000 + 2,800 amoritize.)
Cannot subtract provision for income taxes 400,000 from total book income.
Attachment:- XYZ.rar