Question

Marin Services has provided the following information for use in determining its income tax obligations related to the year ended December 31, 2017. Marin Services Income Statement For the Year Ended December 31, 2017 Revenue Service Revenue Dividend Revenue Received Life Insurance Proceeds Received $875,000 42,000 93,000 Total Revenue $1,010,000 Operating Expenses Office Expenses Depreciation Expense Advertising Expense Meals and Entertainment Expense Rent EXpense Litigation Expense Life Insurance Premiums Paid Salaries and Wages Expense Warranty Expense 21,000 91,000 19,000 19,000 33,000 26,000 7,200 355,000 46,000 617,200 $392,800 Total Operating Expense Incoem From Operations

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Answer 1

Calculation of Taxable Income as per Income Tax Act

Income From Operations as per Accounting Records: $392800

Add: All Expenses which are disallowed in Income Tax

2) Warranty Expenses $46000

7) Speeding Ticket(Not Allowed as per Income tax) $140

5) Law suit expenses $26000

3) Depreciation as per books $91000

Less Above 4 Expenses allowed as per Tax Laws

2) Warranty Expense(On Cash Basis) $9200

7) Speeding ticket not allowed as it is a voilation of law $0

5) Law suit expense allowed only when paid $0

3) Depreciation as per Tax law

(546000*20/100=109200 WDV436800*20/100) $87360

Less: Income as per Accounting records

4) Life INsurance Proceeds on death(Not taxable in income tax) $93000

6) Revenue received from customers in advance(1/2*32000) $16000

Add: The above income as per tax law

4) Not taxable if received on death $0

6) Full Amouunt is taxable in the year of payment $32000

TAXABLE INCOME AS PER TAX LAW   $382380

TAX PAYABLE @25% $95595