Problem 11-7 Schedule M-1 (LO 11.4) The Loquat Corporation has book net income o
ID: 2393880 • Letter: P
Question
Problem 11-7 Schedule M-1 (LO 11.4) The Loquat Corporation has book net income of $50,000 for the current year. Included in this figure are the following items, which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return . Federal income tax expense $7,500 Depreciation deducted on the books which is not deductible for tax purposes 10,000 Deduction for 50 percent of meals and entertainment expense which is not allowed for tax purposes 5,500 Deduction for a tax penalty not allowed for tax purposes 2,000 . Tax-exempt interest income included in book income but 4,200 not in tax income Calculate Loquat Corporation's taxable income for the current year based on the information given.Explanation / Answer
Calculation of Taxable Income for the Current Year:- $ Net Income As per Books of Accounts 50,000.00 Add:federal income tax expenses 7,500.00 Less:Depreciation deducted on the books but not deductible for tax purposes - 10,000.00 Less:deduction for 50% meals and entertainment which is not allowed for income tax purposes(5500*50/100) - 2,750.00 Less:deduction for atax penalty but not allowed for tax purposes - 2,000.00 Less:tax exempt income included in books but not for tax income - 4,200.00 Taxable income 38,550.00 Here assumed meals and entertainment expenses is given the full amount ,so 2750 is deducted otherwise 5500 is deductible.Federal income tax expense is deducted for arriving net income as per books so it is added back.