Taxpayer of interest the depot continuing with the

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with the $1,000 difference in 2016. (Taxpayerof interest: the Depot)Continuing with the Wine and Cheese Depot: The restaurant owners paid the Depot $1,000 on January 31, 2017 and closed the business on February 6, 2017. Based on the bankruptcy case for the restaurant, the lawyers and collections departments confirmed the Depot would receive none of the remaining bill outstanding from the restaurant.2017$1,000Tax deduction = $1,000Book expense = $0FavorableTemporaryThe CEO and CFO of a Rudolph ChocolatiersCorporation traveled from their headquarters in New York to the Louis Armstrong International Airport in New Orleans, LA on June 8, 2016 to determine whether they wanted to add another chocolate shop location to the area. The executives’ flights were $400 in total, with total lodging costs of $950, and meals totaling $420. The executives did not stay for any personal travelbut returned home immediately after the meetings.2016$210Tax deduction = $1,560 (only 50% meals)Book expense = $1,770UnfavorablePermanentIn 2016, Ring-a-ling, a telephone company, received $4,000 in interest income from a bond it held for the city of Fairfax.2016$4,000Taxable income =$0Book income =$4,000FavorablePermanent2
2.(30 points total) Reginald Bank offered its Chief Investment Officer (CIO) 5,000 options to purchase company stock at $5/share on January 1, YEAR 1. The stock was selling at the same price in the public market that day. Assume that Reginald Bank estimates the value of the options on the grant date is $10/share. The vesting period was 50 percent for YEAR 1 and50 percent for YEAR 2. On December 31, YEAR 2, the stock was worth $7/share, but the CIO believed that stock prices were going up; so she waited until December 31, YEAR 3 to exercise all her options and turn around and sell the shares the same day when the stock pricewas $15/share. a.If YEAR 1 is 2000, YEAR 2 is 2001, and YEAR 3 is 2002 and the above options are non-qualified stock options (NQOs):i.(3 points: 1 for each year amount) What is the amount of expense will Reginald Bank recognize in its income statement for financial reporting in 2000, 2001, and 2002?ii.(3 points: 1 for each year amount) What is the amount of deduction for Reginald Bank related to the stock options in 2000, 2001, and 2002?iii.(9 points: 3 points for each question with 1 point per question per year) What amount of book-tax differences (BTD) will Reginald Bank have in 2000, 2001, and 2002 related to the stock options? Is it favorable or unfavorable? Is it temporary or permanent?b.Repeat a. parts i.-iii. if instead YEAR 1 is 2014, YEAR 2 is 2015, and YEAR 3 is 2016. (The point breakout for part b. is just like in part a.)ANSWERS: a. i.$0 for each of 2000, 2001, and 2002.a. ii. $0 for each of 2000 and 2001. In 2002(year of exercise), a deduction for the “bargain element” = ($15/share - $5/share) x 5,000 shares = $50,000a. iii. $0 for each of 2000 and 2001, thus favorable/unfavorable or temporary/permanent not relevant. $50,000 BTD in 2002. The $50,000in 2002 is favorableand permanent
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