Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v2.3.0.15
Income Taxes
 9 Months Ended
Aug. 31, 2011
Income Taxes [Abstract]  
INCOME TAXES
NOTE 12 — INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of August 31, 2011 and August 31, 2010. ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no penalties or related interest for the fiscal year to date ended August 31, 2011 or for the fiscal year to date ended August 31, 2010. The Company had no officer salaries that were not deductible for tax purposes during the three months and nine months ended August 31, 2011. During the three and nine months ended August 31, 2010, the Company had $79,650 and $461,523, respectively of officer salaries that were not deductible for tax purposes in calculating the income tax provision.
As of August 31, 2011, the Company had unrealized losses on its investments of $(76,301). This amount was reduced by a deferred tax benefit of $30,826, of which a $24,928 benefit was recorded in prior fiscal years and a benefit of $5,898 was recorded during fiscal 2011. The deferred tax benefit has been recorded as part of the deferred tax asset, and offset against the unrealized losses on marketable securities reported on the consolidated balance sheets.
At August 31, 2011 and November 30, 2010, respectively, the Company had temporary differences arising from the following:
                                 
    August 31, 2011  
                    Classified As  
            Deferred     Short-Term     Long-Term  
Type   Amount     Tax     Asset     (Liability)  
 
                               
Depreciation
  $ (363,062 )   $ (146,677 )   $ —     $ (146,677 )
Unrealized loss on investments
    76,301       30,826       30,826          
Reserve for bad debts
    43,941       17,752       17,752       —  
Reserve for returns
    1,777,106       717,951       717,951       —  
Reserve for obsolete inventory
    813,217       328,540       328,540       —  
Vacation accrual
    337,688       136,426       136,426       —  
Charitable Contributions
    413,228       166,944       166,944       —  
Section 263A costs
    231,459       93,509       93,509       —  
 
                         
 
                               
Net deferred tax asset (liability)
          $ 1,345,271     $ 1,491,948     $ (146,677 )
 
                         
                                 
    November 30, 2010  
                    Classified As  
            Deferred     Short-Term     Long-Term  
Type   Amount     Tax     Asset     (Liability)  
 
                               
Depreciation
  $ (290,262 )   $ (118,717 )   $ —     $ (118,717 )
Unrealized loss on investments
    60,950       24,929       24,929       —  
Reserve for bad debts
    24,739       10,119       10,119       —  
Reserve for returns
    1,238,510       506,551       506,551       —  
Reserve for obsolete inventory
    1,372,798       561,474       561,474       —  
Vacation accrual
    251,083       102,693       102,693       —  
Net Operating Loss (Restated)
    774,736       316,866       316,866       —  
Charitable Contributions
    285,221       116,655       116,655       —  
Section 263A costs
    284,831       116,496       116,496       —  
 
                         
 
                               
Net deferred tax asset (liability)
          $ 1,637,066     $ 1,755,783     $ (118,717 )
 
                         
Income tax expense (benefit) consists of the following components:
                 
    Three Months Ended August 31,  
    2011     2010  
 
               
Current (benefit) — Federal
  $ —     $ (29,757 )
Current tax — State & Local
    34,989       57,784  
Deferred tax expense (benefit)
    263,573       (137,323 )
 
           
 
               
Total tax expense (benefit)
  $ 298,562     $ (109,296 )
 
           
                 
    Nine Months Ended August 31,  
    2011     2010  
 
Current tax expense — Federal
  $ —     $ 122,551  
Current tax expense — State & Local
    48,611       103,073  
 
           
Deferred tax expense (benefit)
    297,693       (363,099 )
 
           
 
               
Total tax expense (benefit)
  $ 346,304     $ (137,475 )
 
           
Prepaid income taxes consist of the following components:
                         
            State &        
    Federal     Local     Total  
 
                       
August 31, 2011
  $ 520,230     $ 453,611     $ 973,841  
 
                 
 
                       
November 30, 2010
  $ 519,825     $ 479,877     $ 999,702  
 
                 
Income tax payable consists of the following components:
                         
            State &        
    Federal     Local     Total  
 
                       
August 31, 2011
  $ —     $ 22,500     $ 22,500  
 
                 
 
                       
November 30, 2010
  $ —     $ —     $ —  
 
                 
A reconciliation of (benefit from) provision for income taxes computed at the statutory rate to the effective rate for the three months ended August 31, 2011 and 2010 is as follows:
                                 
                    Three Months Ended  
    Three Months Ended     August 31, 2010  
    August 31, 2011             Percent  
            Percent             of Pretax  
    Amount     Amount     Amount     Income  
Provision for (benefit from) income taxes at federal statutory rate
  $ 237,271       34.00 %   $ (240,557 )     (34.00 )%
Increases in taxes resulting from:
                               
State income taxes, net of federal income tax benefit
    41,453       5.94       (42,027 )     (5.94 )
 
                               
Non-deductible expenses and other adjustments
    19,838       2.84       173,288       24.49  
 
                       
 
                               
Provision for (benefit from) income taxes
  $ 298,562       42.78 %   $ (109,296 )     (15.45 )%
 
                       
                                 
                    Nine Months Ended  
    Nine Months Ended     August 31, 2010  
    August 31, 2011             Percent  
            Percent             of Pretax  
    Amount     Amount     Amount     Income  
Provision for (benefit from) Income taxes at federal statutory rate
  $ 286,088       34.00 %   $ (375,610 )     (34.00 )%
Increases in taxes resulting from:
                               
State income taxes, net of federal income tax benefit
    49,981       5.94       (65,621 )     (5.94 )
 
                               
Non-deductible expenses and other adjustments
    10,235       1.22       303,756       27.50  
 
                       
 
                               
Provision for (benefit from) income taxes
  $ 346,304       41.16 %   $ (137,475 )     (12.44 )%