Assignment
Jackson Corporation prepared the following book income statement for its year ended
December 31, 2018:
Sales $950,000
Minus: Cost of goods sold (450,000)
Gross profit $500,000
Plus: Dividends received on Invest Corporation stock $ 3,000
Gain on sale of Invest Corporation stock 30,000
Total dividends and gain 33,000
Minus: Depreciation ($7,500 + $52,000) $ 59,500
Bad debt expense 22,000
Other operating expenses 105,500
Loss on sale of Equipment 1 70,000
Total expenses and loss (257,000)
Net income per books before taxes $276,000
Minus: Federal income tax expense (90,000)
Net income per books $186,000
Information on equipment depreciation and sale:
Equipment 1:
• Acquired March 3, 2016 for $180,000
• For books: 12-year life; straight-line depreciation
• Sold February 17, 2018 for $80,000
Sales price $ 80,000
Cost $180,000
Minus: Depreciation for 2016 (½ year) $ 7,500
Depreciation for 2017 ($180,000/12) 15,000
Depreciation for 2018 (½ year) 7,500
Total book depreciation (30,000)
Book value at time of sale (150,000)
Book loss on sale of Equipment 1 $(70,000)
• For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the acquisition year and elected out of bonus depreciation.
Equipment 2:
• Acquired February 16, 2017 for $624,000
• For books: 12-year life; straight-line depreciation
• Book depreciation in 2018: $624,000/12 = $52,000
• For tax: Seven-year MACRS property for which the corporation made the Sec. 179 election in 2017 but elected out of bonus depreciation.
Other information:
• Under the direct writeoff method, Jackson deducts $15,000 of bad debts for tax purposes.
• Jackson has a $40,000 NOL carryover and a $6,000 capital loss carryover from last year.
• Jackson purchased the Invest Corporation stock (less than 20% owned) on June 21, 2016, for $25,000 and sold the stock on December 21, 2018, for $55,000.
Required:
a. For 2018, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the tax loss on the sale of Equipment 1.
b. For 2018, calculate Jackson's taxable income and tax liability.
c. Prepare a schedule reconciling net income per books to taxable income before special deductions (Form 1120, line 28).
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.