XYZ is a calendar-year corporation that began business on January 1, 2018. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6. XYZ corp. Book Income Income statement For current year
Revenue from sales $ 40,000,000
Cost of Goods Sold (27,000,000 )
Gross profit $ 13,000,000
Other income:
Income from investment in corporate stock 300,000
1. Interest income 20,000
2. Capital gains (losses) (4,000 )
Gain or loss from disposition of fixed assets 3,000
3. Miscellaneous income 50,000
Gross Income $ 13,369,000
Expenses:
Compensation (7,500,000 )
4. Stock option compensation (200,000 )
5. Advertising (1,350,000 )
Repairs and Maintenance (75,000 )
Rent (22,000 )
Bad Debt expense (41,000 )
6. Depreciation (1,400,000 )
7. Warranty expenses (70,000 )
8. Charitable donations (500,000 )
9. Meals (18,000 )
Goodwill impairment (30,000 )
10. Organizational expenditures (44,000 )
11. Other expenses (140,000 )
12. Total expenses $ (11,390,000 )
Income before taxes $ 1,979,000
Provision for income taxes (720,000 )
13. Net Income after taxes $ 1,259,000
a. Compute XYZ’s taxable income.
b. Compute XYZ’s regular income tax liability. (Use Corporate Tax Rate Schedule.)
c. Complete XYZ’s Schedule M-1. (Enter all amounts as positive numbers.)
d. Compute XYZ’s alternative minimum tax, if any.