[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.
Chapter2: Introduction To Financial Statements
Section: Chapter Questions
Problem 5EB: For each of the following items, identify whether the item is considered current or noncurrent, and...
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.
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:
9781133935940
Author:
Ulric J. Gelinas
Publisher:
CENGAGE L
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:
9781133935940
Author:
Ulric J. Gelinas
Publisher:
CENGAGE L
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning