MMM Company has taxable income of $300,000.The company received a dividend of $50,000 from a domestic corporation in which it holds a 60% ownership interest.It also has tax depreciation that is $20,000 greater than financial statement depreciation.These items were properly accounted for in determining taxable income.Without regard to tax expense,what is financial statement income of MMM Company?

Question

Quizplus · Accepted Answer

Financial statement income is calculated by starting with taxable income and adjusting for any items that are not recognized on the financial statements, such as tax depreciation. Therefore, financial statement income for MMM Company would be:

Taxable income: $300,000
Add: Tax-exempt dividend income (60% of $50,000): $30,000
Add: Tax depreciation in excess of financial statement depreciation: $20,000
Financial statement income: $360,000

MMM Company Has Taxable Income of $300,000