The corporation's current earnings and profits for year one would be (A) $354,000.
<h3>
What is taxable income?</h3>
- The base on which an income tax system levies tax is referred to as taxable income.
- In other words, the income is subject to taxation by the government.
- In general, it includes some or all elements of income before costs and other deductions are deducted.
- Income, costs, and other deductions differ depending on the country or system.
- Many systems stipulate that certain types of income are not taxable (also known as non-assessable income) and that certain expenses are not deductible when calculating taxable income.
- Some systems base tax on current-period taxable income, while others base it on prior-period taxable income.
<h3>To find the current earnings and profit for one year:</h3>
Income + Installment sale = 500,000 + 25,000 = $525,000
Income taxes + tax-exempt income = 170,000 + 1000 = $171,000
525,000 - 171,000 = $354,000
Therefore, the corporation's current earnings and profits for year one would be (A) $354,000.
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Complete question:
Grand River Corporation reported taxable income of $500,000 in year 1 and paid federal income taxes of $170,000. Not included in the computation was a disallowed meal and entertainment expense of $2,000, tax-exempt income of $1,000, and deferred gain on an installment sale of $25,000. The corporation's current earnings and profits for year 1 would be:
A) $354,000.
B) $524,000.
C) $500,000.
D) $331,000.
