1.

The MONIQUE Company reported E&P of $500,000 in 2022. The company paid $125,000 in federal taxes for the year. If you start with E&P of $500,000 what adjustment will be necessary for the $125,000 for purposes of calculating taxable income?

		a. a $125,000 addition.
		b. a $125,000 deduction.
		c. no adjustment.
		d. none of the above.

2.

MONIQUE Company reported taxable income of $500,000 in 2022. This amount does not include a $5,000 nondeductible (for tax purposes) entertainment expense. If you start with taxable income of $500,000 what adjustment will be necessary for the $5,000 entertainment expense for purposes of calculating E&P?

		a. a $5,000 addition.
		b. a $5,000 deduction.
		c. no adjustment.
		d. none of the above.