Franton Co

question 37

Essay

Franton Co., a calendar year, accrual basis corporation, reported $2,076,000 net income after tax on its 2015 financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information.
· Federal tax expense per books was $1,069,000.
· Franton received $22,400 of dividends from its investment in Microsoft and General Motors stock.
· Bad debt expense was $12,900, and write-offs of uncollectible accounts receivable totaled $16,300.
· Book depreciation was $110,890, and MACRS depreciation was $94,700.
· Franton paid a $50,000 fine to the City of Albany for illegal trash dumping.
Compute Franton's taxable income and regular tax liability.

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Definitions:

Progressive Income Tax

A tax system where the tax rate increases as the taxable income increases, aimed at redistributing income more equitably.

Ability-to-Pay Principle

A taxation principle suggesting that taxes should be levied based on an individual's or entity's ability to pay, often implying higher rates for higher income levels.

Tax Equity

The fairness of a tax system, judged by how evenly or proportionately tax burdens are distributed among different groups of taxpayers.

Economic Income

The total value of all income received by an individual or entity, including both monetary returns and the monetary value of non-monetary gains.