Question

1. Review of Ace’s financial reports and information revealed the following:

Sales 2.4 million

Opening inventory 650,000

Purchase 1.1million

Closing inventory 585,000

Heat, light utilities 300,000

Employee payroll 245,000

Executive salary and pension 350,000

EPA fines 85,000

Life insurance premiums paid 47,000

Life insurance collected on death of vice-president 500,000

Depreciation expense: GAAP Double declining balance total for year 85,000

MACRS, including section 179 and special first year, 692,000

Income tax paid Federal Regular 62,000, AMT 16,000, New York State/City 27,000

Compute income reported for GAAP purposes and taxable income, if different.

Categorize as favorable/unfavorable a differences. Are they timing or permanent differences

Answer 1

the answer is as follows