Question

Problem 11-7
Schedule M-1 (LO 11.4)

The Loquat Corporation has book net income of $50,000 for the current year. Included in this figure are the following items, which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.

• Federal income tax expense $7,500 • Depreciation deducted on the books which is not deductible for tax purposes 10,000 • Deduction for 50 percent of meals and entertainment expense which is not allowed for tax purposes 5,500 • Deduction for a tax penalty not allowed for tax purposes 2,000 • Tax-exempt interest income included in book income but not in tax income 4,200

Calculate Loquat Corporation's taxable income for the current year based on the information given.

Answer 1

S.NO	Calculation of Taxable Income for the Current Year:-			$Amount
1	Net Income As per Books of Accounts			50,000.00
2	Add:federal income tax expenses			7,500.00
3	Add:Depreciation deducted on the books but not deductible for tax purposes(which is already deducted need to add back)			10,000.00
4	Add:deduction for 50% meals and entertainment which is not
	allowed for income tax purposes(5500*50/100)(which is already deducted need to add back)			2,750.00
5	Add:deduction for tax penalty but not allowed for tax purposes(which is already deducted need to add back)			2,000.00
6	Less:tax exempt income included in books but not for tax income(Exempted)			( 4,200.00)
	Taxable income			68050.00