Grand River Corporation reported taxable income of $550,000 in 20X3 and paid federal income taxes of $192,500. Not included in the computation was a disallowed meals and entertainment expense of $3,000, tax-exempt income of $2,000, and deferred gain on a current-year transaction treated as an installment sale of $30,000. The corporation's current earnings and profits for 20X3 would be:

$336,500

Explanation:

Grand River corporation has a taxable income of $500,000 in 20X3

They paid a federal income tax of $192,500

The amount of expense that was not added to the report is $3,000

The tax exempt income is $2,000

The deferred gain is $30,000

Therefore, the current earinings and profits of the corporation for the year 20X3 can be calculated as follows

= Taxable income-federal income taxes-expenses-tax exempt income+deferred gain

=$500,000-$192,500-$3,000+$2,000+$30,000

= $336,500

Hence the current earnings and profits for the corporation is $336,500

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