Cramer Corporation, a calendar year, accrual basis corporation, reported $1.90 million ofnet income after tax on its 2020 financial statements prepared in accordance withGAAP. The corporation's books and records reveal the following information: Cramer'sfederal income tax expense per books was $218,000. Cramer's book income included$28,000 of dividends received from a domestic corporation in which Cramer owns a 25percent stock interest, and $13,000 of dividends from a domestic corporation in whichCramer owns a 5 percent stock interest. Cramer recognized $28,000 of capital lossesthis year and no capital gains. Cramer recorded $17,000 of book expense for meals and$19,000 of book expense for entertainment costs. Cramer's depreciation expense forbook purposes totaled $418,000. MACRS depreciation was $475,000. Required:Compute Cramer's federal taxable income and regular tax liability. Prepare a ScheduleM-1, page 6, Form 1120, reconciling Cramer's book and taxable income.

To compute Cramer’s federal taxable income, we need to adjust the book income for the differences…

book purposes totaled $418,000. MACRS depreciation was $475,000. Required: Compute Cramer's federal taxable income and regular tax liability. Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable income.

book purposes totaled $418,000. MACRS depreciation was $475,000. Required: Compute Cramer's federal taxable income and regular tax liability. Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable income.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 47P

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Subject: acounting
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Gosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information: Gosling earned $3,500 on an investment in tax-exempt municipal bonds. Gosling received an advance payment of rent this year for $25,000. This amount was not included in book income. Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000. Gosling recorded $58,000 of business meals and $27,000 of entertainment expense for book purposes. Gosling's federal income tax expense per books was $220,000. a. Compute Gosling's taxable income and regular tax liability. b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income.
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