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Question: Complete the items below that would appear on a book/tax reconciliation for Schedule M-1 on...

Question:

Complete the items below that would appear on a book/tax reconciliation for Schedule M-1 on the IRS Form 1120, U.S. Corporation Income Tax Return, for InterTax’s first year of operations. Based on the data provided in the exhibit, enter the appropriate values in the associated cells below. Please enter additions as positive whole numbers and subtractions as negative whole numbers. If an amount is zero, enter a zero (0).

Note: The deduction for organizational expenses in the year was $5,707.

A B
1.) Net income per books
2.) Federal income tax per books
3.) Depreciation recorded on books not deducted on the return
4.) Charitable contributions recorded on books not deducted on the return
5.) Other expenses recorded on books not deducted on return
6.) Tax-exempt interest
7.) Depreciation deducted on return not expensed on the books
8.) Taxable income per tax return $   

InterTac Inc.

INCOME STATEMENT:

Tax   Book
Income
Consulting Fees 1,880,000 1,880,000
Tax-Exempt Interest 0 2,400
Interest Income on Bank Accounts 16,400 16,400
Total Income 1,896,400 1,898,800
Expenses
Organization Expenses 5,707 15,600
Office Salaries 800,000 800,000
Salaries and Wages 240,000 240,000
Rent 76,800 76,800
Utilities 12,000 12,000
Advertising 30,000 30,000
Repairs 2,000 2,000
Taxes 10,000 10,000
Employee Benefits 2,000 2,000
Interest 10,000 10,000
Office Supplies 7,000 7,000
Depreciation 75,200 30,400
Total Expense 1,207,707 1,235,800
Net Income Before Contributions 625,693 663,000
Charitable Contributions 62,569 80,000
Pre-Tax Income 563,124 583,000
Federal Tax Expense 191,462 186,560
Net Income 371,662 396,440

Note: There were no shareholder distributions during the year.

Solutions

Expert Solution

Answer-

A B
1.) Net income per books $396,440
2.) Federal income tax per books $186,560
3.) Depreciation recorded on books not deducted on the return (Note 1) - $44,800
4.) Charitable contributions recorded on books not deducted on the return (Note 2) $17,431
5.) Other expenses recorded on books not deducted on return (Note 3) $9,893
6.) Tax-exempt interest $2,400
7.) Depreciation deducted on return not expensed on the books (Note 4) $44,800
8.) Taxable income per tax return $   
563,124

Note 1-
Depreciation recorded in books= $30,400
Less: Depreciation recorded in tax return= $75,200
Depreciation recorded on books but not deducted on return= - $44,800

Note 2-
Charitable contributions recorded on books= $80,000
Less: Charitable contributions recorded on the return= $62,569
Charitable contributions recorded on books not deducted on the return= $17,431

Note 3-
Other expenses recorded on books not deducted on return-

Organisational expenses as per books= $15,600
Less: Organisational expenses as per tax return= $5,707
Other expenses recorded on books not deducted on return= $9,893

Note 4-

Note 1-
Depreciation recorded in tax return= $75,200
Less: Depreciation recorded in books= $30,400
Depreciation recorded on tax return but not on books= $44,800


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