Question

Webster, Inc. has the following items of income and expense for 2016, it first year of operations. Webster began operations on April 1 and uses a calendar year-end.

Gross receipts from sales	$ 1,391,222
Charitable contributions	15,000
Employment taxes	10,250
Interest expense	30,000
Organizational costs	52,600
Office rent expense	31,000
Real estate taxes	15,600
Utilities expense	11,300
Wage expense	93,540

In addition to these items, Webster purchased machinery and equipment costing $1,430,000 and furniture costing $112,000 on April 9, 2016, and a warehouse costing $190,000 on May 2, 2016.

Webster wants to minimize its 2016 income tax liability, which means electing section 179 expense for the maximum the tax law allows, as well as taking the 50-percent bonus depreciation. Compute Webster's 2016 taxable income and income tax liability.

Please only attempt if you can solve the question with a proper explanation. Please do not copy from Chegg.

Answer 1