On January 1, 2019, NSP Corporation, a calendar year, accrual basis C corporation was organized and...
On January 1, 2019, NSP Corporation, a calendar year, accrual basis C corporation
was organized and began business operations. NSP provides network security
protection services for businesses. During 2019, it had financial income (per books)
before tax of $1,000,000.
The following items were
expensed
in arriving at NSP’s 2019 financial income (per
books):
$20,000 of organization costs to organize the corporation; the federal tax
amortization amounted to $6,000.
$20,000 increase to its allowance for doubtful accounts; actual bad debts written
off amounted to $5,000.
$100,000 straight-line financial depreciation; total federal tax depreciation
amounted to $500,000.
$7,000 life insurance premium paid on a key officer of the corporation.
$5,000 political contribution made to a candidate running for a seat in the United
States House of Representatives.
$20,000 of meals and entertainment expenses.
What is NSP Corporation’s 2019 federal taxable income and federal income tax liability?
Please show your work and explain your calculations.
Homework Answers
Answer:
Federal income tax liability = Taxable income * Tax rate in 2019 = 651000 * 21% = $136,710
Hence:
NSP Corporation’s 2019 federal taxable income = $651,000
NSP Corporation’s 2019 Federal income tax liability = $136,710
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