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 $130,883 that has been
reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from August 31, 2012.
At August 31,
2012 and November 30, 2011, respectively, the Company had temporary differences arising from the following:
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August 31, 2012 |
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Classified As |
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Type
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Amount |
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|
Deferred Tax |
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Short-Term Asset |
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|
Long-Term (Liability) |
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Depreciation
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$ |
(487,315 |
) |
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$ |
(194,439 |
) |
|
$ |
— |
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|
$ |
(194,439 |
) |
Unrealized (gain) on investments
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|
(46,855 |
) |
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|
(18,695 |
) |
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|
(18,695 |
) |
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|
— |
|
Reserve for bad debts
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|
17,041 |
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|
6,799 |
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6,799 |
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|
— |
|
Reserve for returns
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|
2,085,249 |
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|
832,014 |
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|
832,014 |
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— |
|
Reserve for obsolete inventory
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|
548,322 |
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|
218,780 |
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218,780 |
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— |
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Vacation accrual
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353,157 |
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|
140,910 |
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140,910 |
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Charitable contributions
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586,368 |
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233,961 |
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103,078 |
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130,883 |
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Section 263A costs
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299,352 |
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119,442 |
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119,442 |
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— |
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Net deferred tax asset (liability)
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$ |
1,338,772 |
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$ |
1,402,328 |
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$ |
(63,556 |
) |
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November 30, 2011 |
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Classified As |
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Type
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Amount |
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Deferred Tax |
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Short-Term Asset |
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Long-Term (Liability) |
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Depreciation
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$ |
(451,334 |
) |
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$ |
(182,339 |
) |
|
$ |
— |
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|
$ |
(182,339 |
) |
Unrealized loss on investments
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|
192,064 |
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77,594 |
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77,594 |
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— |
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Reserve for bad debts
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53,191 |
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21,489 |
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21,489 |
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— |
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Reserve for returns
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2,014,303 |
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813,778 |
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813,778 |
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— |
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Reserve for obsolete inventory
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892,226 |
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360,459 |
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360,459 |
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— |
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Vacation accrual
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348,558 |
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140,817 |
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140,817 |
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— |
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Charitable contributions
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564,583 |
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228,093 |
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228,093 |
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— |
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Section 263A costs
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239,404 |
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96,719 |
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96,719 |
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— |
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Net deferred tax asset (liability)
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$ |
1,556,610 |
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$ |
1,738,949 |
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$ |
(182,339 |
) |
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Income tax expense
is made up of the following components:
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Three Months Ended August 31, |
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2012 |
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2011 |
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Current tax - Federal
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$ |
106,764 |
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$ |
— |
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Current tax - State & Local
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63,463 |
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34,989 |
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Deferred tax
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107,142 |
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263,573 |
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Total tax
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$ |
277,369 |
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$ |
298,562 |
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Nine Months Ended August 31, |
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2012 |
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2011 |
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Current tax - Federal
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$ |
298,382 |
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$ |
— |
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Current tax - State & Local
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|
124,001 |
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|
48,611 |
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Deferred tax
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|
121,549 |
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297,693 |
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Total tax
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$ |
543,932 |
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$ |
346,304 |
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Prepaid and refundable income taxes are made up of the following components:
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State & |
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Federal |
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Local |
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Total |
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August 31, 2012
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$ |
70,125 |
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$ |
268,597 |
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$ |
338,722 |
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November 30, 2011
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$ |
368,507 |
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$ |
350,321 |
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$ |
718,828 |
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Income tax payable is made up of the following components:
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State & |
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Federal |
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Local |
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Total |
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August 31, 2012
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$ |
— |
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$ |
13,624 |
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$ |
13,624 |
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November 30, 2011
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$ |
— |
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$ |
47,232 |
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$ |
47,232 |
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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:
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Three Months Ended |
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Three Months Ended |
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August 31, 2012 |
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August 31, 2011 |
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Amount |
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Percent of Pretax Income |
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Amount |
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Percent of Pretax Income |
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Provision for income taxes at federal statutory rate
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$ |
240,079 |
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34.00 |
% |
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$ |
237,271 |
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34.00 |
% |
Increases in taxes resulting from:
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State income taxes, net of federal income tax benefit
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45,191 |
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6.40 |
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41,453 |
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5.94 |
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Non-deductible expenses and other adjustments
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(7,901 |
) |
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(1.12 |
) |
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19,838 |
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2.84 |
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Provision for income taxes at effective rate
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$ |
277,369 |
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|
39.28 |
% |
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$ |
298,562 |
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42.78 |
% |
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Nine Months Ended |
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Nine Months Ended |
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August 31, 2012 |
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August 31, 2011 |
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Percent |
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Percent |
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of Pretax |
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of Pretax |
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Amount |
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Income |
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Amount |
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Income |
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Provision for income taxes at statutory rate
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$ |
463,186 |
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34.00 |
% |
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$ |
286,088 |
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34.00 |
% |
Increases in taxes resulting from:
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State income taxes, net of federal income tax benefit
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|
87,188 |
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|
6.40 |
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|
49,981 |
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|
5.94 |
|
Non-deductible expenses and other adjustments
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|
(6,442 |
) |
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|
(0.47 |
) |
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|
10,235 |
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1.22 |
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Provision for income taxes at effective rate
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$ |
543,932 |
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39.93 |
% |
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$ |
346,304 |
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41.16 |
% |
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