Question

Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 2019 financial statements prepared in accordance with GAAP. The corporation’s books and records reveal the following information:

• Western’s book income included $15,000 of dividends, received from a domestic corporation in which Western owns less than 1 percent of the outstanding stock.
• Western’s depreciation expense per books was $55,000, and its MACRS depreciation was $70,000.
• Western earned $5,000 of interest from municipal bonds and $6,000 of interest from corporate bonds.
• Western’s capital losses exceeded its capital gains by $2,000.
• Western’s federal income tax expense per books was $103,000.

1. Compute Western’s federal taxable income and regular tax liability.
2. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western’s book and taxable income.

3. Compute Western’s federal taxable income and regular tax liability. (Enter your answers in whole dollars not in millions.)

   	Taxable income $195,330selected WRONGt Tax liability $574,500 WRONG

Answer 1