Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 9 Months Ended
Aug. 31, 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 August 31, 2012 and August 31, 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 August 31, 2012, which were included in selling, general and administrative expenses, and no penalties for the fiscal year to date ended August 31, 2011.

As of August 31, 2012, the Company had unrealized gain on its investments of $46,855. This amount was reduced by a deferred tax (expense) of $(18,695), of which a $77,594 benefit was recorded in prior fiscal years and an expense of $(96,289) was recorded in the nine months ended August 31, 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 sheet. The charitable contributions portion of the deferred tax asset has $130,883 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 August 31, 2012.

 

At August 31, 2012 and November 30, 2011, respectively, the Company had temporary differences arising from the following:

 

                                 
    August 31, 2012  
                Classified As  

Type

   Amount     Deferred Tax     Short-Term
Asset		     Long-Term
(Liability)		  

Depreciation

   $ (487,315 )    $ (194,439 )    $ —       $ (194,439 ) 

Unrealized (gain) on investments

     (46,855 )      (18,695 )      (18,695 )      —    

Reserve for bad debts

     17,041       6,799       6,799       —    

Reserve for returns

     2,085,249       832,014       832,014       —    

Reserve for obsolete inventory

     548,322       218,780       218,780       —    

Vacation accrual

     353,157       140,910       140,910          

Charitable contributions

     586,368       233,961       103,078       130,883  

Section 263A costs

     299,352       119,442       119,442       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

  

   $ 1,338,772     $ 1,402,328     $ (63,556 ) 
           

 

 

    

 

 

    

 

 

  
   
    November 30, 2011  
                Classified As  

Type

   Amount     Deferred Tax     Short-Term
Asset		     Long-Term
(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 August 31,  
    2012     2011  

Current tax - Federal

   $ 106,764     $ —    

Current tax - State & Local

     63,463       34,989  

Deferred tax

     107,142       263,573  
   

 

 

    

 

 

  

Total tax

   $ 277,369     $ 298,562  
   

 

 

    

 

 

  
   
    Nine Months Ended August 31,  
    2012     2011  

Current tax - Federal

   $ 298,382     $ —    

Current tax - State & Local

     124,001       48,611  

Deferred tax

     121,549       297,693  
   

 

 

    

 

 

  

Total tax

   $ 543,932     $ 346,304  
   

 

 

    

 

 

  

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

 

                         
          State &        
    Federal     Local     Total  

August 31, 2012

   $ 70,125     $ 268,597     $ 338,722  
   

 

 

    

 

 

    

 

 

  

November 30, 2011

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

 

 

    

 

 

    

 

 

  

Income tax payable is made up of the following components:

 

                         
          State &        
    Federal     Local     Total  

August 31, 2012

   $ —       $ 13,624     $ 13,624  
   

 

 

    

 

 

    

 

 

  

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 and nine months ended August 31, 2012 and August 31, 2011 is as follows:

 

                                 
    Three Months Ended     Three Months Ended  
    August 31, 2012     August 31, 2011  
    Amount     Percent
of Pretax
Income		     Amount     Percent
of Pretax
Income		  

Provision for income taxes at federal statutory rate

   $ 240,079       34.00 %    $ 237,271       34.00 % 

Increases in taxes resulting from:

                                

State income taxes, net of federal income tax benefit

     45,191       6.40       41,453       5.94  

Non-deductible expenses and other adjustments

     (7,901 )      (1.12 )      19,838       2.84  
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes at effective rate

   $ 277,369       39.28 %    $ 298,562       42.78 % 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

 

                                 
    Nine Months Ended     Nine Months Ended  
    August 31, 2012     August 31, 2011  
          Percent           Percent  
          of Pretax           of Pretax  
    Amount     Income     Amount     Income  

Provision for income taxes at statutory rate

   $ 463,186       34.00 %    $ 286,088       34.00 % 

Increases in taxes resulting from:

                                

State income taxes, net of federal income tax benefit

     87,188       6.40       49,981       5.94  

Non-deductible expenses and other adjustments

     (6,442 )      (0.47 )      10,235       1.22  
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes at effective rate

   $ 543,932       39.93 %    $ 346,304       41.16 %