Problem: Geraldo, a calendar-year, accrual basis corporation, reported $931,000 net income before tax on its audited financial statements. Its records reveal the following information.
1. On February 1, Geraldo purchased a business and capitalized $500,000 of the cost to goodwill.
2. Book depreciation expense was $66,100, and MACRS depreciation was $77,800.
3. Geraldo paid an $18,500 premium for its employee group term life insurance plan and a $5,900 premium for its key-person life insurance policies.
4. Geraldo accrued a $35,000 expense for the estimated settlement of a breach-ofcontract suit that should go to court next year.
a. Compute Geraldo's taxable income.
b. Compute Geraldo's federal tax expense per books and federal tax payable.