Croydon is calendar year, accrual Basis Corporation, MR and Mrs. Croyden (cash basis taxpayers ) are the sole corporation shareholder . Mr. Croyden is president and Mrs. croyden is vise president of the corporation, Croyden's financial records. Prepared in accordance with GAAP, show the following information for the year,
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Revenues from sides goods
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$12,900,000
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Cost of goods sold( LIFO)
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(9,260,000)
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Gross profit
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3,640,000
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Bad debt expense
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24,000
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Administration salaries and wages
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612,000
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State and local business taxes
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135,000
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Interest expense
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33,900
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Advertising
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67,000
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Annual property insurance premiums
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19,800
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Annual life insurance premiums
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7,300
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Depreciation expense
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148,800
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Repairs maintains ,utilities
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81,000
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Croydon's records reveal the following facts.
- Under the UNICAP. Rules,Coryden had no capitalize $ 142,800 of administrative wages to inventory . These wages were expected for financial statement purpose.
- Because of the UNICAP rules, Crodyen's cost of goods sold for tax purposes exceeds cost of goods sold for financial statement purpose by $ 219,000.
- Bad debt expense equals the additional to corporation's allowance for bad debts .Actual wirte -offs of uncollectable accounts during the year totaled $31,200.
- Administrative salaries includes as accrued $ 50,000 year -end bonus to Mr. .Croyden and accrued $ 20,000 year -end bonus to Mrs Croyden .these bonuses were paid on January 17 of the following year .
- Life insurance premium were on the key -person polices for Mr. and Mrs. .Croyden .the Corporation is the policy beneficiary.
- Croyden disposed of two assets during the year (these disposition are not reflected in the financial statement information shown above) .it sold office furnishing for $ 45,000. The original cost of the furnishings was $ 40,000, and accumulated MACRS depreciation through date of sale was $ 12,700. It also exchanged transportation equipment for a 15 percent interest in the partnership. The original cost of the transportation equipment was $ 110, 000, and accumulated MACRS deprecation through date of exchange was $ 38,900.
- MACRS depreciation for assets places in service in prior years (including the office furnishings and transportation equipment disposed of this year) is $ 187,600.the only assets acquired this year was equipment costing $ 275,000 .the equipment has a seven -year recovery period and was placed In the services on February 11 .
- Coryden's prior year tax return show no nonrecaptured section 1231 losses and $ 7,400 capital loss carryforward
- Solely on the basis above facts, compute Crodyen's taxable income