Paul Inc, a calendar year C-Corp and accrual method taxpayer, provides the follo
ID: 2335472 • Letter: P
Question
Paul Inc, a calendar year C-Corp and accrual method taxpayer, provides the following information and wants a Schedule M-1 prepared (state which line each amount should be on on Schedule M-1). Journal entries should also be prepared.
Journal Entries:
Net Income per Book 535,000 Tax Exempt Interest Income 300 Federal Income Tax Paid 12,000 Life Insurance Proceeds 80,000-received upon death of key employee-the President Capital Loss 8,000 MACRS Tax Depreciation 200,000 - depreciation taken on the tax return Book Depreciation 20,000 - depreciation taken for book (financial statement) Meals and Entertainment 6,000 - reported on financial statementExplanation / Answer
Financial Statement Debit Credit Tax Return Expense Fed Tax Expense 12000 Depreciation Expense 0 180000 Excess Capital Loss 8000 Meals and Entertainment Expense 6000 Tax Exempt Int Expense 0 Life Insurance premiums(Key employee) 0 Income Tax Exempt Income 300 Life Insurance proceeds (key employee) 80000 Schedule M1 Net Income/Loss as per books $535,000 Line 1 Federal Income tax as per books 12000 Line 2 Excess of capital losses over capital gains 8000 Line 3 Income subject to tax not recorded on books this year 0 Line 4 Expenses recorded on books this year not deducted on this return Line 5 Depreciation 0 Line 5a Charitable contributions 0 Line 5b Travel and entertainment $6,000 Line 5c Subtotal (Line 1 through Line 5) $561,000 Line 6 Income Recorded on books this year not included on this return Line 7 Tax Exempt interest $300 Line 7a Life insurance proceeds received as a result of the death of the corporate president $80,000 Line 7b Deductions on this return not charged against book income this year Line 8 Depreciation $180,000 Charitable contributions 0 Subtotal (Line 7 throught line 8) $260,300 Line 9 Income (Line 6 less line 9) $300,700 Line 10 Depreciation as per books 20000 Depreciation as per tax returns 200000 -180000