This Year, Zulou Industries Capitalized $552,000 Indirect Costs to Inventory

question 87

Multiple Choice

This year, Zulou Industries capitalized $552,000 indirect costs to inventory for book purposes and $591,600 indirect cost to inventory under unicap. Zulou's cost of goods sold for book purposes was $2,458,000, and its cost of goods sold for tax purposes was $2,707,000. If Zulou has no other book/tax differences, and its book income is $5,000,000, compute Zulou's taxable income.

• A) $4,711,400
• B) $4,751,000
• C) $4,790,600
• D) $5,288,600

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Definitions:

Economic Income

The total value of all earnings received over a period, including wages, profits, rents, and any gains from the sale or appreciation of assets.

Net Worth

The total assets minus total liabilities of an individual or entity, representing the value of their economic position.

Consumption

The use of goods and services by households or individuals, representing the final use of produced goods and services in an economy.

Horizontal Equity

is a principle in taxation that mandates taxpayers with similar income or assets should be taxed at the same rate.