Manistee corporation reported taxable income of $1,200,000 this year and paid federal income taxes of $408,000. not included in the computation was disallowed entertainment expenses of $25,000, tax-exempt interest of $20,000, and a net capital loss of $50,000 incurred this year. manistee is an accrual basis taxpayer. the corporation’s current earnings and profits this year would be:

a. $1,200,000
b. $1,145,000
c. $787,000
d. $737,000

corporation current earning and profits = $737000

Explanation:

given data

taxable income = $1,200,000

paid federal income taxes = $408,000

entertainment expenses = $25,000

tax-exempt interest = $20,000

net capital loss = $50,000

solution

we get here corporation current earning and profits that will be as

corporation current earnings and profits = taxable income - paid federal income taxes - entertainment expenses + tax-exempt interest - net capital loss   1

put here value we get

corporation current earning and profits = $1,200,000 - $408,000 -$25,000

+ $20,000 - $50,000

corporation current earning and profits = $737000

it should be