Beta Corporation (the Company), which is an environmental service company, is taxed as a C Corporation and has a calendar accounting period. The Company files its income tax return (form 1120) on the...


Beta Corporation (the Company), which is an environmental<br>service company, is taxed as a C Corporation and has a calendar<br>accounting period. The Company files its income tax return<br>(form 1120) on the accrual method of accounting. The<br>Company's gross receipts for each of the years ended December<br>31, 2018-2020 have exceeded $50 million dollars and the<br>Company is not otherwise exempted from the requirements of<br>IRC Sec 163(j). The Company's trial balance for the year ended<br>December 31, 2021, is as follows. Note: The Company does not<br>have any floor plan financing interest expense and the Company<br>files income tax returns in Virginia only and the tax rate in<br>Virginia is a flat 6%.<br>Beta Corporation<br>Trial Balance<br>12.31.21<br>Debit<br>Credit<br>Cash<br>25,000<br>Accounts receivable<br>230,000<br>Equipment<br>Accumulated depreciation<br>1,750,000<br>1,750,000<br>Intangible assets<br>145.000<br>Accumulated amortization<br>14,500<br>Accounts payable<br>Notes payable bank<br>45,000<br>2,000,000<br>Common Stock<br>5,000<br>Retained earnings<br>1,777,000<br>Sales<br>54,250,000<br>Depreciation<br>175,000<br>Amorization<br>14,500<br>Labor<br>53,745,000<br>Fines and penalties<br>Interest expense<br>3,000<br>200,000<br>58,064,500 58,064,500<br>Required:<br>1. Determine the Company's limitation (if any) with respect to<br>its ability to deduct interest expense for the year ended<br>December 31, 2021.<br>2. Determine the Company's carryforward of interest expense,<br>if any, to years subsequent to December 31, 2021.<br>3. In both cases, show all computations.<br>

Extracted text: Beta Corporation (the Company), which is an environmental service company, is taxed as a C Corporation and has a calendar accounting period. The Company files its income tax return (form 1120) on the accrual method of accounting. The Company's gross receipts for each of the years ended December 31, 2018-2020 have exceeded $50 million dollars and the Company is not otherwise exempted from the requirements of IRC Sec 163(j). The Company's trial balance for the year ended December 31, 2021, is as follows. Note: The Company does not have any floor plan financing interest expense and the Company files income tax returns in Virginia only and the tax rate in Virginia is a flat 6%. Beta Corporation Trial Balance 12.31.21 Debit Credit Cash 25,000 Accounts receivable 230,000 Equipment Accumulated depreciation 1,750,000 1,750,000 Intangible assets 145.000 Accumulated amortization 14,500 Accounts payable Notes payable bank 45,000 2,000,000 Common Stock 5,000 Retained earnings 1,777,000 Sales 54,250,000 Depreciation 175,000 Amorization 14,500 Labor 53,745,000 Fines and penalties Interest expense 3,000 200,000 58,064,500 58,064,500 Required: 1. Determine the Company's limitation (if any) with respect to its ability to deduct interest expense for the year ended December 31, 2021. 2. Determine the Company's carryforward of interest expense, if any, to years subsequent to December 31, 2021. 3. In both cases, show all computations.

Jun 01, 2022
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