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    Geraldo: US tax problem

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    Geraldo, a calendar-year, accrual basis corporation, reported $931,000 net income before tax on its audited financial statements. Its records reveal the following information.

    ? On February 1, Geraldo purchased a business and capitalized $500,000 of the
    cost to goodwill.
    ? Book depreciation expense was $66,100, and MACRS depreciation was $77,800.
    ? Geraldo paid an $18,500 premium for its employee group term life insurance
    plan and a $5,900 premium for its key-person life insurance policies.
    ? Geraldo accrued a $35,000 expense for the estimated settlement of a breach-ofcontract
    suit that should go to court next year.
    a. Compute Geraldo's taxable income.
    b. Compute Geraldo's federal tax expense per books and federal tax payable.

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    Solution Preview

    1. Additional depreciation 77,800-66,100= 11,700 will be deductible
    2.Good will allowed to be amortized in 15 years as per section 197, therefore amount ...

    Solution Summary

    The expert examines a United States tax problems for Geraldo.