[17] For the current year, accrual-basis Corp. A's books and records reflected the following: Net income per books $104,000 Accrued federal income tax 35,000 Net capital loss 4,000 Tax-exempt interest 5,000 Book depreciation in excess of allowable tax depreciation 2,000 Based on the above facts, what is the amount of A's taxable income? A. $69,000 B. $70,000 C. $140,000 $150,000 D. The correct answer is C. A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital loss and excess book depreciation must be added back, and tax-exempt interest income must be subtracted. B. Federal income taxes are not subtracted; they are added back to book net income. C. Federal income tax, excess capital losses, and book depreciation in excess of tax depreciation are not deductible. These amounts must be added back to book income. Tax- exempt interest is not taxable and must be subtracted from book income. These adjustments are done on Schedule M-1 of the corporation tax return. Net income per books Add back: Federal income tax Net capital loss Excess book depreciation $104,000 2,000 35,000 4,000 $145,000 (5,000) $140,000 Subtract: Tax-exempt interest Taxable income D. The tax-exempt interest is not added back; it is subtracted from book net income. 1. Prepare Form 1120, schedule M1. Please attach 2. Of the line items that you filled in, which is a temporary difference? Explain. If there is more than one, choose the best answer. 3. 4. Which item is a permanent difference? Explain. If there is more than one, choose the best answer.
[17] For the current year, accrual-basis Corp. A's books and records reflected the following: Net income per books $104,000 Accrued federal income tax 35,000 Net capital loss 4,000 Tax-exempt interest 5,000 Book depreciation in excess of allowable tax depreciation 2,000 Based on the above facts, what is the amount of A's taxable income? A. $69,000 B. $70,000 C. $140,000 $150,000 D. The correct answer is C. A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital loss and excess book depreciation must be added back, and tax-exempt interest income must be subtracted. B. Federal income taxes are not subtracted; they are added back to book net income. C. Federal income tax, excess capital losses, and book depreciation in excess of tax depreciation are not deductible. These amounts must be added back to book income. Tax- exempt interest is not taxable and must be subtracted from book income. These adjustments are done on Schedule M-1 of the corporation tax return. Net income per books Add back: Federal income tax Net capital loss Excess book depreciation $104,000 2,000 35,000 4,000 $145,000 (5,000) $140,000 Subtract: Tax-exempt interest Taxable income D. The tax-exempt interest is not added back; it is subtracted from book net income. 1. Prepare Form 1120, schedule M1. Please attach 2. Of the line items that you filled in, which is a temporary difference? Explain. If there is more than one, choose the best answer. 3. 4. Which item is a permanent difference? Explain. If there is more than one, choose the best answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![[17] For the current year, accrual-basis Corp. A's books and records reflected the following:
Net income per books
$104,000
Accrued federal income tax
35,000
Net capital loss
4,000
Tax-exempt interest
5,000
Book depreciation in excess of
allowable tax depreciation
2,000
Based on the above facts, what is the amount of A's taxable income?
A. $69,000
B. $70,000
C. $140,000
$150,000
D.
The correct answer is C.
A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital
loss and excess book depreciation must be added back, and tax-exempt interest income must
be subtracted.
B. Federal income taxes are not subtracted; they are added back to book net income.
C. Federal income tax, excess capital losses, and book depreciation in excess of tax
depreciation are not deductible. These amounts must be added back to book income. Tax-
exempt interest is not taxable and must be subtracted from book income. These adjustments are
done on Schedule M-1 of the corporation tax return.
Net income per books
Add back:
Federal income tax
Net capital loss
Excess book depreciation
$104,000
2,000
35,000
4,000
$145,000
(5,000)
$140,000
Subtract: Tax-exempt interest
Taxable income
D. The tax-exempt interest is not added back; it is subtracted from book net income.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd7a310b-f295-403f-a012-47fe2085f9dc%2F6932c48d-19b8-4f4a-bf0e-2ff16ba186f0%2F5oxlzfm_processed.png&w=3840&q=75)
Transcribed Image Text:[17] For the current year, accrual-basis Corp. A's books and records reflected the following:
Net income per books
$104,000
Accrued federal income tax
35,000
Net capital loss
4,000
Tax-exempt interest
5,000
Book depreciation in excess of
allowable tax depreciation
2,000
Based on the above facts, what is the amount of A's taxable income?
A. $69,000
B. $70,000
C. $140,000
$150,000
D.
The correct answer is C.
A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital
loss and excess book depreciation must be added back, and tax-exempt interest income must
be subtracted.
B. Federal income taxes are not subtracted; they are added back to book net income.
C. Federal income tax, excess capital losses, and book depreciation in excess of tax
depreciation are not deductible. These amounts must be added back to book income. Tax-
exempt interest is not taxable and must be subtracted from book income. These adjustments are
done on Schedule M-1 of the corporation tax return.
Net income per books
Add back:
Federal income tax
Net capital loss
Excess book depreciation
$104,000
2,000
35,000
4,000
$145,000
(5,000)
$140,000
Subtract: Tax-exempt interest
Taxable income
D. The tax-exempt interest is not added back; it is subtracted from book net income.
Transcribed Image Text:1. Prepare Form 1120, schedule M1. Please attach
2. Of the line items that you filled in, which is a temporary difference? Explain. If there is more than one, choose the best answer.
3.
4. Which item is a permanent difference? Explain. If there is more than one, choose the best answer.
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