Question

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.

Answer 1

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