The operating results for Ahmad Corporation, an S corporation, for last year wer

Question

The operating results for Ahmad Corporation, an S corporation, for last year were as follows:

Revenues

Gross sales                                          $2,000,000

Tax-exempt bond interest                    2,000

Dividend income                                 8,000

Section 1231 gain (land)                     10,000

Expenses

Cost of goods sold                              $900,000

Salaries                                               600,000

Rent                                                     200,000

Utilities                                               60,000

Depreciation                                        40,000

Charitable contribution                                     12,000

Section 179 expense                           20,000

Determine the corporation’s net income and its separately stated items.

Determine the corporation’s financial accounting income if the gain on the sale of the land is only $6,000 and depreciation is $32,000 under financial accounting rules.

Determine tax payable

Explanation / Answer

Calculation of Taxable Income

Gross Sales 2,000,000 Add: Dividend Income 8,000 Add: Section 1231 Gain 10,000 Gross Income 2,018,000 Less: Deduction COGS 900,000 Salaries 600,000 Rent                                                     200,000 Utilities 60,000 Depreciation                                        40,000 Charitable contribution 12,000 Section 179 Expenses 20,000 Total Deductions 1,832,000 Taxable Income 186,000

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