For the current year, the Beech Corporation has net income on its books of $60,000, including the following items: $\begin{array}{llcc}
\text {Net capital losses } & \$15,000 \
\text {Federal income tax expense } &\$25,000\
\end{array}$
Federal tax depreciation exceeds the depreciation deducted on the books by $5,000.What is the corporation's taxable income?

Question

For the current year, the Beech Corporation has net income on its books of $60,000, including the following items: $\begin{array}{llcc}
  \text {Net capital losses  } & \$15,000 \
 \text {Federal income tax expense  } &\$25,000\
\end{array}$
 Federal tax depreciation exceeds the depreciation deducted on the books by $5,000.What is the corporation's taxable income?

Quizplus · Accepted Answer

To calculate taxable income, add back non-deductible expenses and adjust for differences in book and tax depreciation. Start with net income of $60,000, add back federal income tax expense of $25,000, and adjust for the $5,000 excess tax depreciation. The net capital loss is not deductible for tax purposes, so it doesn't affect taxable income. Thus, taxable income is $60,000 + $25,000 + $5,000 = $90,000.