Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Nov. 30, 2011
Income Taxes [Abstract]  
INCOME TAXES

NOTE 7 — 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, 2011 and November 30, 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 penalties of $3,060 for the fiscal year ended November 30, 2011 and no penalties or related interest for the fiscal year ended November 30, 2010.

The Company had $0, $547,566 and $747,668 respectively of officer salaries during fiscal 2011, 2010 and 2009 that were not deductible for tax purposes in calculating the income tax provision. As of November 30, 2011, the Company had unrealized losses on its investments of $192,064, which, if realized, would have a tax benefit of $77,594. 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, 2011 and 2010, respectively:

 

      September 30,       September 30,       September 30,       September 30,  
     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 ) 
           

 

 

    

 

 

    

 

 

  
   
     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) is made up of the following components:

 

      September 30,       September 30,       September 30,  
    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  
   

 

 

    

 

 

    

 

 

  

 

      September 30,       September 30,       September 30,  
    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 ) 
   

 

 

    

 

 

    

 

 

  

 

      September 30,       September 30,       September 30,  
    November 30, 2009  
    Federal     State & Local     Total  

Current tax expense

   $ 1,613,144     $ 525,101     $ 2,138,245  

Deferred tax expense

     30,981       9,254       40,235  
   

 

 

    

 

 

    

 

 

  
    $ 1,644,125     $ 534,355     $ 2,178,480  
   

 

 

    

 

 

    

 

 

  

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

 

      September 30,       September 30,       September 30,  
    Federal     State & Local     Total  

November 30, 2011

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

 

 

    

 

 

    

 

 

  

November 30, 2010

   $ 519,825     $ 479,877     $ 999,702  
   

 

 

    

 

 

    

 

 

  

Income tax payable is made up of the following components:

 

      September 30,       September 30,       September 30,  
    Federal     State & Local     Total  
       

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, 2011, 2010 and 2009 is as follows:

 

      September 30,       September 30,       September 30,       September 30,       September 30,       September 30,  
    2011     2010     2009  
                                  Percent  
          Percent           Percent           Of Pretax  
    Amount     Amount     Amount     Amount     Amount     Income  

Income tax expense at federal statutory rate

   $ 324,101       34.00 %    $ (801,667 )      34.00 %    $ 1,907,442       34.00 % 

Increases (decreases) in taxes resulting from:

                                                

State income taxes, net of federal income tax benefit

     104,465       10.96       (128,045 )      5.43       320,899       5.72  
             

Non-deductible expenses and other adjustments

     32,975       3.46       236,627       (10.04 )      (49,861 )      (0.89 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

Income tax expense (benefit) at effective rate

   $ 461,541       48.42 %    $ (693,085 )      29.39 %    $ 2,178,480       38.83 %