Black, Inc Black, Inc Black, Inc

question 112

Essay

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 35% corporate tax rate and no valuation allowance.
$\begin{array}{lcc}&\text { Tax Debit/(Credit) }&\text {Book Debit/(Credit) }\\\text { Assets }\\\text { Cash } & \$ 300 & \$ 300 \\\text { Accounts Receivable } & 5,000 & 5,000 \\\text { Buildings } & 300,000 & 300,000 \\\text { Acc. Depreciation } & (150,000) & (80,000) \\\text { Furniture \& Fixtures } & 40,000 & 40,000 \\\text { Acc. Depreciation } & \underline{(21,000)} & \underline{(15,000)} \\\text { Total Assets } & \underline{\$ 174,300} & \underline{\$ 250,300}\\\\\text { Liabilities }\\\text { Accrued Litigation Expense } & \$-0- & (\$ 27,000) \\\text { Note Payable } & \underline{(116,000)} & \underline{(116,000)} \\\text { Total Liabilities } & \underline{(\$ 116,000)} & \underline{(\$ 143,000)}\\\\\text { Stockholders' Equity }\\\text { Paid in Capital } & (\$ 1,000) & (\$ 1,000) \\\text { Retained Earnings } & \underline{(57,300)} & \underline{(106,300) }\\\text { Total Liabilities and } & & \\\text { Stockholders' Equity } & \underline{(\$ 174,300)} &\underline{(\$ 250,300)}\end{array}$



Black, Inc.’s, gross deferred tax assets and liabilities at the beginning of Black’s year are listed below.
$$\begin{array} { l r } \text { Accrued Litigation Expense } & \underline { \$ 20,000 } \\\text { Subtotal } & \$ 20,000 \\\text { Applicable Tax Rate } & \times 35 \% \\\text { Gross Deferred Tax Asset } & \underline { \$ 7,000 } \\\\\text { Building - Acc. Depreciation } & ( \$ 61,000 ) \\\text { Furniture \& fixtures - Acc. Depreciation } & \underline { ( 3,000 ) } \\\text { Subtotal } & \underline { ( \$ 64,000 ) } \\\text { Applicable tax rate } & \underline { \times 35 \% } \\\text { Gross deferred tax liability } & \underline { ( \$ 2,400 ) }\end{array}$$
Black, Inc.’s, book income before tax is $6,000. Black records two permanent book-tax differences. It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals and entertainment expense. Determine the change in Black’s deferred tax liabilities for the current year.

Learn the correct procedures for refilling differential carriers with lubricant.

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Definitions:

Act-of-State Doctrine

A principle in international law that holds that a nation is sovereign within its own borders and its domestic actions cannot be questioned by the courts of another nation.

Foreign Sovereign Nation

A foreign sovereign nation refers to a country that operates under its own autonomous government and is recognized as having complete authority over its territory and political affairs, separate from other nations.

Commercial Activities

Business operations or actions that are directly related to the exchange of goods, services, or anything of value between businesses or entities.

Foreign State

A country or nation other than the one where a legal judgment or action is being considered or taken.