Question

This year Truckit reported taxable income of $160,000 and received $20,000 of municipal interest. Truckit paid $55,000 in entertainment expenses and $15,000 in fines and penalties Truckit had $50,000 of accumulated E&P at the beginning of the year. What is Truckit’s current E&P?a)180,000
b)142,200
c)110,000
d)76,400

Answer 1

Answer:

Explanation:

Since in the question, the corporate tax rate is not given, So, the current E&P would be

= Taxable income + municipal interest - entertainment expenses  - fines and penalties

= $160,000 + $20,000 - $55,000 - $15,000

= $110,000

And, if we assume the corporate tax rate is 21%, so the current E&P would be

== Taxable income + municipal interest - entertainment expenses  - fines and penalties - tax expenses

= $160,000 + $20,000 - $55,000 - $15,000 - $160,000 × 21%

= $76,400

In both the methods, the answer would be different.