Question

Question 2 (6 Points) Andersen Corporation, a calendar year, accrual method, C-Corporation, is in the business of manufacturing glass based products. In 2019, Andersen Corporation had taxable income before any limitations of $500.000. Andersen Corporation's had average annual gross receipts over the previous three tax years of $29,000,000. The following items of income and deductions are included in the computation of taxable income $400,000 business interest expense $250,000 depreciation $30,000 business interest income $75,000 amortization $100,000 research and development expenses $200,000 executive compensation (5 points) Given the information above, how much interest expense can Andersen Corporation deduct in 2019?

Answer 1

Computation of Adjusted tenable income Particulars Amount $5,00,000 $4,00,000 $ 2,50,000 $ 15000 Tanable income (t) Interest expense Depreciation Amortization w Poterest income Adjusted tonable income CEBITDA) $ 30.000 $1,195,000 Net interest capense Interest expense (-) Business interest income Net interest expense $ 400000 $ (30000) 3,70,000 As per tax law interest expense is deductible upto 30% of adjusted tanable income. Any amt in excess of that is carried forward indefinitely Thus allowable interest expense deduction is $358500 ($1195000x300) & remaining $1500 will be clf. - Andersen corporation had an average annual grous receipts of $23,000,000 over the previous 3 years, it will get exemption hon from limitation limitation on on int int dedo deductibility & The net int eapense of $340000 will be dead oupense. It provides an exemption from tim deductibility whose arg annual gross receipts didn't event $25 million. motion from limitation on int - Page No.