Knight_Corporation_inclass_assignment - Tax 6065 Spring...

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Tax 6065 Spring 2010 In-Class Assignment #5 FAS 109/FIN 48 Knight Corporation is a calendar-year, accrual basis corporation with no subsidiaries. The marginal applicable federal tax rate is 35%. Financial accounting income before consideration of the following items is $15,000,000. For simplicity, assume Knight Corporation has no prior-year book-tax differences. Thus the change to its deferred tax assets and liabilities is based solely upon current-year transactions. Additional Items (these have not yet been accounted for): 1. Knight uses the allowance method for accounting for bad debts for financial accounting purposes. Bad Debt expense per books is $50,000. Bad Debt write-offs for the year were $22,000. 2. Knight incurred $20,000 of meals and entertainment expense during the year (these expenses are subject to the 50% disallowance for tax purposes). 3. Knight Corporation’s book depreciation is $500,000; their tax depreciation is $1,200,000. 4. Knight has a $30,000 capital loss on the sale of land held for investment purposes. Management is unsure that sufficient capital gain income will be recognized within the tax law carry forward period. They
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Knight_Corporation_inclass_assignment - Tax 6065 Spring...

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