Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 3 Months Ended
Feb. 29, 2012
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 February 29, 2012 and February 28, 2011. 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 penalties and related interest of $6,661 for the fiscal year to date ended February 29, 2012, and no penalties for the fiscal year to date ended February 28, 2011.

 

As of February 29, 2012, the Company had unrealized gain on its investments of $85,404. This amount was reduced by a deferred tax (expense) of $(34,503), of which a $77,594 benefit was recorded in prior fiscal years and an expense of ($112,097) was recorded in the first quarter of fiscal 2012. The deferred tax expense has been recorded as part of the deferred tax asset, and offset against the unrealized gains on marketable securities reported on the consolidated balance sheets. The charitable contributions portion of the deferred tax asset has $110,252 that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from February 29, 2012.

At February 29, 2012 and November 30, 2011, respectively, the Company had temporary differences arising from the following:

 

                                 
    February 29, 2012  
                Classified As  
          Deferred     Short-Term     Long-Term  

Type

   Amount     Tax     Asset     (Liability)  

Depreciation

   $ (449,832 )    $ (181,550 )      —       $ (181,550 ) 

Unrealized gain on investments

     85,404       (34,503 )      (34,503 )      —    

Reserve for bad debts

     25,027       10,111       10,111       —    

Reserve for returns

     1,869,505       755,280       755,280       —    

Reserve for obsolete inventory

     857,813       346,556       346,556       —    

Vacation accrual

     287,713       156,636       156,636       —    

Charitable Contributions

     567,629       229,322       119,070       110,252  

Section 263A costs

     274,025       110,706       110,706       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

           $ 1,392,558     $ 1,463,856     $ (71,298 ) 
           

 

 

    

 

 

    

 

 

  

 

                                 
    November 30, 2011  
                Classified As  
          Deferred     Short-Term     Long-Term  

Type

   Amount     Tax     Asset     (Liability)  

Depreciation

   $ (451,334 )    $ (182,339 )      —       $ (182,339 ) 

Unrealized loss on investments

     192,064       77,594       77,594       —    

Reserve for bad debts

     53,191       21,489       21,489       —    

Reserve for returns

     2,014,303       813,778       813,778       —    

Reserve for obsolete inventory

     892,226       360,459       360,459       —    

Vacation accrual

     348,558       140,817       140,817       —    

Charitable Contributions

     564,583       228,093       228,093       —    

Section 263A costs

     239,404       96,719       96,719       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

           $ 1,556,610     $ 1,738,949     $ (182,339 ) 
           

 

 

    

 

 

    

 

 

  

Income tax expense is made up of the following components:

 

                 
    Three Months Ended  
    February 29,
2012		     February 28,
2011		  

Current tax expense—Federal

   $ 11,488     $ —    

Current tax expense – State & Local

     3,469       18,385  

Deferred tax expense

     51,955       235,126  
   

 

 

    

 

 

  

Total tax expense

   $ 66,912     $ 253,511  
   

 

 

    

 

 

  

Prepaid and refundable income taxes are made up of the following components:

 

                         
          State &        
    Federal     Local     Total  

February 29, 2012

   $ 357,018     $ 349,472     $ 706,490  
   

 

 

    

 

 

    

 

 

  

November 30, 2011

   $ 368,507     $ 350,321     $ 718,828  
   

 

 

    

 

 

    

 

 

  

 

Income tax payable is made up of the following components:

 

                         
          State &        
    Federal     Local     Total  

February 29, 2012

   $ —       $ 23,979     $ 23,979  
   

 

 

    

 

 

    

 

 

  

November 30, 2011

   $ —       $ 47,232     $ 47,232  
   

 

 

    

 

 

    

 

 

  

A reconciliation of the provision for income taxes computed at the statutory rate to the effective rate for the three months ended February 29, 2012 and February 28, 2011 is as follows:

 

                                 
    Three Months Ended
February 29, 2012 		    Three Months Ended
February 28, 2011 		 
          Percent           Percent  
          of Pretax           of Pretax  
    Amount     Amount     Amount     Income  

Provision for Income taxes at federal statutory rate

   $ 52,512       34.00 %    $ 202,849       34.00 % 

Increases in taxes resulting from:

                                

State income taxes, net of federal income tax benefit

     9,483       6.14       41,166       6.90  
         

Non-deductible expenses and other adjustments

     4,917       3.18       9,496       1.59  
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes at effective rate

   $ 66,912       43.32 %    $ 253,511       42.49 %