Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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. Required: Compute Western’s federal taxable income and regular tax liability. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western’s book and taxable income.
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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. Required: Compute Western’s federal taxable income and regular tax liability. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western’s book and taxable income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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.
Required:
- Compute Western’s federal taxable income and regular tax liability.
- Prepare a Schedule M-1, page 6, Form 1120, reconciling Western’s book and taxable income.
![1.
Problem 11-13 (Static) [LO 11-3, 11-4]
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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.
Required:
a. Compute Western's federal taxable income and regular tax liability.
b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income.
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Western's federal taxable income and regular tax liability. (Enter your answers in whole dollars not in millions.)
Taxable income
Tax liability
References
Tax Form Question
Problem 11-13
(Static) [LO 11-3, 11-
4]
Amount
< Required A
Difficulty: 2 Medium
Learning Objective: 11-03
Prepare a reconciliation of
book and taxable income.
Required B >
Learning Objective: 11-04 Compute the regular tax on
corporate taxable income.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa346793b-80d5-4ccc-868f-245d8e3948ba%2Fff555160-70a7-49a5-9961-65f51d37f13c%2Fimqqpfh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1.
Problem 11-13 (Static) [LO 11-3, 11-4]
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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.
Required:
a. Compute Western's federal taxable income and regular tax liability.
b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income.
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Western's federal taxable income and regular tax liability. (Enter your answers in whole dollars not in millions.)
Taxable income
Tax liability
References
Tax Form Question
Problem 11-13
(Static) [LO 11-3, 11-
4]
Amount
< Required A
Difficulty: 2 Medium
Learning Objective: 11-03
Prepare a reconciliation of
book and taxable income.
Required B >
Learning Objective: 11-04 Compute the regular tax on
corporate taxable income.
![1.
Problem 11-13 (Static) [LO 11-3, 11-4]
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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.
Required:
a. Compute Western's federal taxable income and regular tax liability.
b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income. (Any Expenses (Line 5) and Deductions (Line 8) that
are not included under Depreciation, Charitable Contributions, and Travel and Entertainment should be combined in the corresponding line item
"Other". Enter all amounts as positive. Enter your answers in whole dollars not in millions.)
Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return
Note: The corporation may be required to file Schedule M-3. See instructions
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):
0
5 Expenses recorded on books this year not deducted on
this return (itemize):
a Depreciation
b Charitable contributions
c Travel and entertainment
d Other (include all items)
6 Add lines 1 through 5
References
Tax Form Question
0
0
Problem 11-13 (Static)
[LO 11-3, 11-4]
500,000 7 Income recorded on books this year not included on
103,000 this return (itemize):
2,000
Tax-exempt interest
Difficulty: 2 Medium
0
8 Deductions on this return not charged against book
income this year (itemize):
a Depreciation
b Charitable contributions
c Other (include all items)
09 Add Ines 7 and 8
605,000 10 Income (page 1, line 28)-line 6 less line 9
THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS
OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education.
< Required A
5,000
Learning Objective: 11-03
Prepare a reconciliation of book
and taxable income.
Required B >
15,000
5,000
15,000
20,000
585,000
Learning Objective: 11-04 Compute the regular tax on corporate
taxable income.
Show less A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa346793b-80d5-4ccc-868f-245d8e3948ba%2Fff555160-70a7-49a5-9961-65f51d37f13c%2Fb6ozdks_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1.
Problem 11-13 (Static) [LO 11-3, 11-4]
Western Corporation, a calendar year, accrual basis corporation, reported $500,000 of net income after tax on its 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.
Required:
a. Compute Western's federal taxable income and regular tax liability.
b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare a Schedule M-1, page 6, Form 1120, reconciling Western's book and taxable income. (Any Expenses (Line 5) and Deductions (Line 8) that
are not included under Depreciation, Charitable Contributions, and Travel and Entertainment should be combined in the corresponding line item
"Other". Enter all amounts as positive. Enter your answers in whole dollars not in millions.)
Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return
Note: The corporation may be required to file Schedule M-3. See instructions
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):
0
5 Expenses recorded on books this year not deducted on
this return (itemize):
a Depreciation
b Charitable contributions
c Travel and entertainment
d Other (include all items)
6 Add lines 1 through 5
References
Tax Form Question
0
0
Problem 11-13 (Static)
[LO 11-3, 11-4]
500,000 7 Income recorded on books this year not included on
103,000 this return (itemize):
2,000
Tax-exempt interest
Difficulty: 2 Medium
0
8 Deductions on this return not charged against book
income this year (itemize):
a Depreciation
b Charitable contributions
c Other (include all items)
09 Add Ines 7 and 8
605,000 10 Income (page 1, line 28)-line 6 less line 9
THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS
OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education.
< Required A
5,000
Learning Objective: 11-03
Prepare a reconciliation of book
and taxable income.
Required B >
15,000
5,000
15,000
20,000
585,000
Learning Objective: 11-04 Compute the regular tax on corporate
taxable income.
Show less A
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