# Problem 5-28 (LO. 1, 2) In each of the following independent situations, indicate the effect on...

###### Question:

Problem 5-28 (LO. 1, 2) In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) in each as a result of the transaction. Assume that E & P has already been increased by taxable income. Enter a decrease as a negative number by using the minus sign. If there is no effect, enter "o". Taxable Income Increase (Decrease) E & P Increase (Decrease) Transaction C. a. Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized). b. Mining exploration costs incurred on May 1 of current year; $24,000 is deductible from current-year taxable income. Sale of equipment to unrelated third party for$240,000; basis is $120,000 (no election out of installment method; no payments are received in current year). d. Dividends of$20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply). Additional first-year (bonus) depreciation of $45,000 claimed in current year. OUTDOO e. f. Section 179 expense deduction of$25,000 in current year. g. Impact of current-year 179 expense deduction in succeeding year.
Taxable Income Increase (Decrease) E & P Increase (Decrease) C. Transaction a. Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized), b. Mining exploration costs incurred on May 1 of current year; $24,000 is deductible from current-year taxable income. Sale of equipment to unrelated third party for$240,000; basis is $120,000 (no election out of installment method; no payments are received in current year). d. Dividends of$20,000 received from 5% owned corporation, together with dividends received deduction (assume that taxable income limit does not apply). Additional first-year (bonus) depreciation of $45,000 claimed in current year. f. Section 179 expense deduction of$25,000 in current year. DONTINUE LIITUNUD e. g. Impact of current-year $179 expense deduction in succeeding year. h. MACRS depreciation of$80,000. ADS depreciation would have been $90,000. i. Federal income taxes of$80,000 paid in current year.

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