ACCT 371 Group Research Case #3 (Chapter 12)Adapted from the text.docx - ACCT 371 Group Research Case#3(Chapter 12 Adapted from the text South-Western

ACCT 371 Group Research Case #3 (Chapter 12)Adapted from the text.docx

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ACCT 371 Group Research Case #3 (Chapter 12) Adapted from the text: South-Western Federal Taxation 2019: Essentials of Taxation: Individuals and Business Entities, 22nd Edition. Your client, Cat Palace, Inc. a C Corporation, has contacted you for some preliminary tax planning. Your client provides the projected 2019 book income statement: Income Statement Income Gross Sales $5,750,000 Sales returns and allowances (200,000) Net sales 5,550,000 Cost of goods sold (2,300,000) Gross profit 3,250,000 Dividends received from stock investments in �� less-than-20%-owned U.S. corporations ��� 43,750 Interest income: State bonds $15,000 Certificates of deposit 20,000
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$35,000 Total income $3,328,750 Expenses Salaries Officer $525,000 Salaries clerical and sales 725,000 Taxes (state, local, and payroll) 238,000 Repairs and maintenance 140,000 Interest expense ** 216,000 Advertising 58,000 Rental expense 109,000 Depreciation * 106,000 Charitable contributions 38,000 Employee benefit programs 60,000 Premiums on officer life insurance policy 40,000 Total expenses ($2,255,000)
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Net income before taxes $1,073,750 Federal income tax (221,734) Net income per books $852,016 *Depreciation for tax purposes is $136,000.
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