N2.AccountCompute HC Inc.’s current-year taxable income given the following information relating to its 2019 activities. Also, compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000. Use Exhibit 16-6.Gross profit from inventory sales of $310,000 (no book–tax differences).Dividends HC received from 28 percent-owned corporation of $120,000 (this is also HC’s pro rata share of the corporation’s earnings).Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL), are $300,000 (no book–tax differences).NOL carryover from prior year of $12,000.Cash charitable contribution of $50,000. Req 1Compute HC's Schedule M-1 assuming that HC's federal income tax expense for book purposes is $30,000. (Enter all valuesas positive numbers.)Req 2Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return1. Net income (loss) per books2. Federal income tax per books3. Excess of capital losses over capital gains4. Income subject to tax not recorded on books this year (itemize)5. Expenses recorded on books this year not deducted on this return (itemize):a. Depreciationb. Charitable contributionsc. Travel and entertainment6. Total7.Income recorded on books this yeat not included on this return (itemize):Tax-exempt interest8. Deductions on this return not charged against book income this year (itemize):a. Depreciationb. Charitable contributions9. Income50,00030,00038,200118,200$ 118,200 Req 1Compute HC Inc.'s current year taxable income given the following information relating to its 2019 activities. (Negative amountsshould be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)DescriptionGross profitReq 2Other income:Dividend incomeGross IncomeExpenses:Business expenses other than DRD, CC, and NOLFederal income tax expenseTotal expenses before charitable contribution, NOL, and DRDdeductionIncome before charitable contribution, NOL and DRDNOL carryover from prior yearTaxable income for charitable contribution limitation purposes(modified taxable income)Charitable contributionsTaxable income before DRDDividends received deduction (DRD)Book/Taxable incomeBook Income Book-tax adjustments(Dr) Cr(Dr)Cr0$EA$69000690690Taxable Income(Dr) Cr$$$69000000

Income that is earned over and above the permissible limit is considered taxable income. In other…

Answered: N2. Account Compute HC Inc.’s…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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N2.

Account

Compute HC Inc.’s current-year taxable income given the following information relating to its 2019 activities. Also, compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000. Use Exhibit 16-6.

Gross profit from inventory sales of $310,000 (no book–tax differences).
Dividends HC received from 28 percent-owned corporation of $120,000 (this is also HC’s pro rata share of the corporation’s earnings).
Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL), are $300,000 (no book–tax differences).
NOL carryover from prior year of $12,000.
Cash charitable contribution of $50,000.

Req 1
Compute HC's Schedule M-1 assuming that HC's federal income tax expense for book purposes is $30,000. (Enter all values
as positive numbers.)
Req 2
Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return
1. Net income (loss) per books
2. Federal income tax per books
3. Excess of capital losses over capital gains
4. Income subject to tax not recorded on books this year (itemize)
5. Expenses recorded on books this year not deducted on this return (itemize):
a. Depreciation
b. Charitable contributions
c. Travel and entertainment
6. Total
7.
Income recorded on books this yeat not included on this return (itemize):
Tax-exempt interest
8. Deductions on this return not charged against book income this year (itemize):
a. Depreciation
b. Charitable contributions
9. Income
50,000
30,000
38,200
118,200
$ 118,200

Req 1
Compute HC Inc.'s current year taxable income given the following information relating to its 2019 activities. (Negative amounts
should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
Description
Gross profit
Req 2
Other income:
Dividend income
Gross Income
Expenses:
Business expenses other than DRD, CC, and NOL
Federal income tax expense
Total expenses before charitable contribution, NOL, and DRD
deduction
Income before charitable contribution, NOL and DRD
NOL carryover from prior year
Taxable income for charitable contribution limitation purposes
(modified taxable income)
Charitable contributions
Taxable income before DRD
Dividends received deduction (DRD)
Book/Taxable income
Book Income Book-tax adjustments
(Dr) Cr
(Dr)
Cr
0
$
EA
$
69
0
0
0
69
0
69
0
Taxable Income
(Dr) Cr
$
$
$
69
0
0
0
0
0
0

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