Question

Jagdon Corp.’s book income was $150,000 for the current year, including interest income from municipal bonds of $5,000 and excess capital losses over capital gains of $10,000. Federal income tax expense of $50,000 was also included in Jagdon’s books. What amount represents Jagdon’s taxable income for the current year?

$185,000
$195,000
$205,000
$215,000

Answer 1

$205,000

Step-by-step explanation:

The computation of the Jagdon’s taxable income is shown below:

= Book income - interest income from municipal bonds + excess capital gain + federal income tax expense

= $150,000 - $5,000 + $10,000 + $50,000

= $205,000

Since the interest income from municipal bonds is exempt so we deduct this amount from the book income as it is included in the book income.