Fallow Corporation is subject to tax only in State X. State income taxes are not deductible...

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Accounting

Fallow Corporation is subject to tax only in State X. Stateincome taxes are not deductible for State X income tax purposes.Fallow generated the following income and deductions:
Sales $4,000,000
Cost of sales 2,800,000
State X income tax expense 200,000
Depreciation allowed for Federal tax purposes 400,000
Depreciation allowed for state tax purposes 250,000
Interest income on Federal obligations 40,000
Interest income on State X obligations 30,000
Expenses related to carrying State X obligations 2,000
a. The starting point in computing the State Xincome tax base is Federal taxable income, which is $.
b. If the interest on State X's obligations isexempt from State X's income tax, Fallow's State X taxable incomeis $.
c. If the interest on State X's obligations issubject to State X's income tax, Fallow's State X taxable income is$.

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Ans A Particulars Amount Sales 4000000 Add Interest income on federal obligation 40000 Less Cost of sales 2800000 Less Depreciation 400000 Less Income tax expense of X 200000 Less Expense related to See Answer

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