The Guava Corporation Has Book Net Income of $90,000 for the Current

question 45

Essay

The Guava Corporation has book net income of $90,000 for the current year. Included in this figure are the following items which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.
​ $\begin{array} { l } \text { 1. Federal income tax expense}& \$25,000\\ \text {2. Depreciation deducted on books, not deductible for tax purposes }& 4,000\\ \text {3. Deduction for 50 percent of meals expense not allowed for tax purposes}&3,000 \\ \text { 4. Deduction for payroll tax penalties not allowed for tax purposes}&2,000 \\ \text { 5. Tax exempt interest income included in book income but not in tax return income}&12,000 \\\end{array}$
Based on the above information, calculate the Guava Corporation's taxable income for the year. Show your calculations.

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Definitions:

Retained Earnings

The portion of net income not distributed as dividends but retained by the company for reinvestment or to pay debt.

Cash Dividend

A payment made by a company out of its profits to its shareholders, usually in the form of cash.

Systematic View

An approach that involves a structured, methodical analysis of a problem, situation, or system.