Grand River Corporation reported taxable income of $500,000 in year 1 and paid federal income taxes of $105,000. Not included in the computation was a disallowed meals 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:

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.

To find the current earnings and profit for one year:

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.