Business Taxation
On Jan 1, 2017, NSP Corporation, a calendar year, accrual basis C corporation was organized and began business operations. NSP provides network security protection services for businesses. During 2017, it had financial income (per books) before tax of $1,000,000.
The following items were expensed in the arriving at NSP’s 2017 financial income (per books):
All these amounts total up to $1,000,000.
-$20,000 of organization costs to organize the corporation; the federal tax amortization amounted to $6,000.
-$20,000 increase to its allowance for doubtful accounts; actual bad debts written off amounted to $5,000.
-$100,000 straight ling financial depreciation; total federal depreciation amounted to $500,000.
-$7,000 life insurance premium paid on a key officer of the corporation.
-$5,000 political contribution maid to a candidate running for a seat in the United States of House of Representatives.
-$20,000 of meals and entertainment expenses.
1) Identify which of NSP’s 2017 items listed above are permanent book/tax differences and which are temporary book/tax differences.
2) What is NSP Corp’s 2017 federal taxable income and federal income tax liability? Please show your work and explain your calculations.
3) What is NSP Corp’s 2017 federal income tax expense for financial income statement purposes? Please show your work and explain your calculations.
4) Prepare NSP Corp’s journal entry to record its 2017 federal income tax expense, federal income tax payable, and any deferred tax assets and/or liabilities.