Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Nov. 30, 2012
Income Taxes

NOTE 10— 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 November 30, 2012 and November 30, 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 of $12,377 for the fiscal year ended November 30, 2012 and $3,060 for the fiscal year ended November 30, 2011, which were recorded in selling, general and administrative expenses in the Consolidated Statement of Operations.

The Company had $0, $0 and $547,566 respectively of officer salaries during fiscal 2012, 2011 and 2010 that were not deductible for tax purposes in calculating the income tax provision. As of November 30, 2012, the Company had unrealized gains on its investments of $55,863, which, if realized, would have a tax expense of $20,616. The Company had a net operating loss of in fiscal 2010 that it elected to carry forward to the 2011 fiscal year. The Company applied the carry forward loss against its adjusted taxable income for fiscal 2011, utilizing the entire carry forward loss.

 

Deferred taxes are the result of temporary differences between assets and liabilities for financial reporting and income tax purposes. The tax effect of temporary differences as reflected in the components of deferred tax assets and liabilities were the following at November 30, 2012 and 2011, respectively:

 

     November 30, 2012  
                 Classified As  

Type

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

Depreciation

    $ (1,028,273 )    $ (379,470 )    $ —        $ (379,470 ) 

Unrealized gain on investments

      (55,863 )      (20,616 )      (20,616 )      —     

Reserve for bad debts

      26,340        9,721        9,721        —     

Reserve for returns

      1,772,405        654,083        654,083        —     

Reserve for obsolete inventories

      671,609        247,849        247,849        —     

Vacation accrual

      323,470        119,372        119,372        —     

Charitable Contributions

      722,555        266,649        126,852        139,797   

Section 263A costs

      285,129        105,223        105,223        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Net deferred tax asset (liability)

      $ 1,002,811      $ 1,242,484      $ (239,673 ) 
    

 

 

    

 

 

    

 

 

  
     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 inventories

      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 (benefit) is made up of the following components:

 

     November 30, 2012  
     Federal      State & Local      Total  

Current tax expense

    $ 2,033       $ 20,907       $ 22,940   

Deferred tax expense

      310,713         144,877         455,590   
  

 

 

     

 

 

     

 

 

  
   $ 312,746       $ 165,784       $ 478,530   
  

 

 

     

 

 

     

 

 

  

 

     November 30, 2011  
     Federal      State & Local      Total  

Current tax expense

    $ 147,471       $ 180,948       $ 328,419   

Deferred tax expense

      59,776         73,346         133,122   
  

 

 

     

 

 

     

 

 

  
   $ 207,247       $ 254,294       $ 461,541   
  

 

 

     

 

 

     

 

 

  

 

    
     November 30, 2010  
     Federal     State & Local     Total  

Current tax (benefit) expense

    $ (390 )    $ 85,916      $ 85,526   

Deferred tax (benefit)

      (605,740 )      (172,871 )      (778,611 ) 
  

 

 

    

 

 

    

 

 

  
   $ (606,130 )    $ (86,955 )    $ (693,085 ) 
  

 

 

    

 

 

    

 

 

  

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

 

     Federal      State & Local      Total  

November 30, 2012

    $ 377,292       $ 367,885       $ 745,177   
  

 

 

     

 

 

     

 

 

  

November 30, 2011

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

 

 

     

 

 

     

 

 

  

Income tax payable is made up of the following components:

 

     Federal      State & Local      Total  

November 30, 2012

    $ —         $ 9,440       $ 9,440   
  

 

 

     

 

 

     

 

 

  

November 30, 2011

    $ —         $ 47,232       $ 47,232   
  

 

 

     

 

 

     

 

 

  

 

A reconciliation of income tax expense computed at the statutory rate to income tax expense at the effective rate for each of the three years ended November 30, 2012, 2011 and 2010 is as follows:

 

     2012     2011     2010  
     Percent     Percent     Percent  
                                     Of Pretax  
     Amount      Amount     Amount      Amount     Amount     Income  

Income tax expense at federal statutory rate

    $ 320,954         34.00 %    $ 324,101         34.00 %    $ (801,667 )      34.00 % 

Increases (decreases) in taxes resulting from:

               

State income taxes, net of federal income tax benefit

      117,290         12.43 %      104,465         10.96        (128,045 )      5.43   

Non-deductible expenses and other adjustments

      40,286         4.26 %      32,975         3.46        236,627        (10.04 ) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Income tax expense (benefit)at effective rate

    $ 478,530         50.69 %    $ 461,541         48.42 %    $ (693,085 )      29.39 %