Please answer ALL 3 parts of the question and SHOW WORK. Lopez Corporation resul

Question

Please answer ALL 3 parts of the question and SHOW WORK.

Lopez Corporation results for the current year are as follows:

Gross Revenue: $600,000

Operating Expenses: $200,600

Dividend Income (stock ownership 9%): $2,000

1. How much is Lopez Corporation's taxable income for 2014?

a) $400,000 b) $399,400 c) $401,400 d) $204,000

2. Assuming your answer to the previous question was "a" $400,000, how much is the corporation's income tax? The corporation is not a professional service corporation.

a) $100,000 b) $140,000 c) $125,000 d) $136,000

3. Included in the deducation of operating expenses in the previous question was a deduction of $10,000 (this is the deductible portion) for meals. There are no other adjustments not indicated here and in the previous question. Recall that E&P is the abilitly of the corporation to make distrubutions, after tax. How much is Jeff's "earning and profits" for 2014?

a) $255,400 b) $391,400 c) $411,400 d) $254,000

Explanation / Answer

Taxable income = gross revenue - operating expenses + dividendincome

= 600,000 - 200,600 +2,000

= $401,400

2)

At income of $400,000 the tax would be $120,000 at 30% taxrate.

3)

Subtrating 10,000 from operating expense will increase theincome by 10,000

So the income is

$401,400 + 10,000 = $414,400

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