Heron Corporation, a calendar year, accrual basis taxpayer, provides the following information for this year and asks you to prepare Schedule M-1:
Net income per books (after-tax) ................. $239,700
Taxable income ...................... 195,000
Federal income tax liability ................... 59,300
Interest income from tax-exempt bonds .............. 5,000
Interest paid on loan incurred to purchase tax-exempt bonds ..... 2,000
Life insurance proceeds received as a result of death of
Heron’s president ..................... 100,000
Premiums paid on policy on life of Heron’s president ........ 4,500
Excess of capital losses over capital gains ............ 2,000
Retained earnings at beginning of year ............. 375,000
Cash dividends paid ..................... 90,000
Tax depreciation in excess of book depreciation .......... 7,500