Question

Can someone explain to me what I did wrong as my net income doesnt equal taxable income. Or am i already correct?

Edit: Sorry if it wasnt clear. The question was to find the net income on the first picture based on the second pictures information. I have answered it and was wondering if someone could check if i did it correctly.
MC16q27a, 2 points, due 0115 Please refer to the multiple choice question pasted on page 2. To understand corporate tax returns, you must have a good understanding of financial income statements. So please prepare an income statement based on the facts provided. I provide a template, but you can use your own. I plan to follow up with tax returns. Tip: once you have prepared your income statement, check it to make sure that the totals compute. You can use the template provided, or you can use your own. In either case, you are responsible for an aesthetic presentation. 104,000 Sales Revenue 0 Assume Cost of Goods Sold zero Gross Profit 104,000 Operating Expenses Depreciation Expense 2,000 Operating Income: Assume $2,000 102,000 Other revenue (loss) Net capital Loss (4,000) 5,000 Interest Revenue Income Before Taxes 103,000 Income Tax Expense 35,000 138,000 Net Income

Answer 1

Computation of A's taxable income

Particulars

net income per books $104000

Add:

book depreciation in excess of allowable depreciation $2000

accrued federal income tax $35000

net capital loss $4000

Less:

tax exempt interest $5000

A's taxable income $140000

Notes:

1. Federal income tax cannot be claimed as deduction in the calculation of net taxable income
2. the amount of depreciation in excess of allowable depreciation is not allowed as a deduction , hence $2000 is added back
3. capital loss cannot be set off againt business income. capital loss can be set off against another capital gain. hence $4000 is added back.
4. tax exempt interest is alraedy added in the net income . as we are required to calculate taxable income it is deducted from net income.