Reference no: EM131784913

Wahlgren Reed Funiture, Inc. is an accrual method taxpayer that uses the calendar year as its tax year. Its gross sales for 2016 were $500,000, and it cost of goods sold was $15,000. In addition to its gross sales, at the end of the year it received $50,000 in advance payments for furniture to be constructed in January 2018. It received $60,000 in interest on a municipal bond, and it paid $ 5000 in interest on a loan obtained to purchase the municipal bond.

In 2015, it purchased machinery with an estimated useful life of 10 years for $ 5,000. Wahlgren uses MACRS and the half-year conversion to depreciate the machinery. The machine has no salvage value.

Wahlgren had $ 6,000 of capital losses and $2,000 of capital gains for the year. Wahlgren paid $15,000 in research and experimental expenditures on October 1, 2016, and elected to amortize the expenditures over 60 months. It paid $3,000 in premiums for life insurance insuring a key employee and naming the corporation as the beneficiary. It paid $10,000 for meals and entertainment during the year. It received $ 20,000 in dividends elected to amortize the expenditures over from U.S. Corporation; it owned five percent of the stock of that corporation. Its qualified production activities income was $250,000. Assume that Wahlgren has sufficient W-2 wages to take the full amount of the deduction bases on the applicable percentage for 2016.) Based on these facts, what are its net income and taxable income for the year?