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Problem C3-59
Reconciling Book Income and Taxable Income. Zero Corporation
reports the following
results for the current year:
Net income per books (after taxes) $33,000
Federal income tax per books 12,000
Tax-exempt interest income 6,000
Interest on loan to purchase tax-exempt bonds 8,000
MACRS depreciation exceeding book depreciation 3,000
Net capital loss 5,000
Insurance premium on life of corporate officer where Zero is the
beneficiary 10,000
Excess charitable contributions carried over to next year 2,500
U.S. production activities deduction 1,000
Prepare a reconciliation of Zero’s taxable income before special
deductions with its book
income.
Case Study I10-52
Able Corporation is a manufacturer of electrical lighting fixtures.
Able is current ly negotiating
with Ralph Johnson, the owner of an unincorporated business, to
acquire his
retail electrical lighting sales business. Johnson’s assets that are to
be acquired include the
following:
Inventory of electrical fixtures $ 30,000 $ 50,000
Store buildings 80,000 100,000
Land 40,000 100,000
Equipment: 7-year recovery period 30,000 50,000
Equipment: 5-year recovery period
Mr. Johnson indicates that a total purchase price of $1,000,000 in
cash is warranted for
the business because of its high profitability and strategic
locations and Able has agreed
that the business is worth $1,000,000. Despite the fact that both
parties attribute the