A) Reconcile book to taxable income and identify each difference as temporary or permanent (20%).

Description	Book Income (Dr) Cr	Book-tax adjustments*		Taxable Income (Dr) Cr
		(Dr)	Cr
Revenue from sales	$40,000,000
Cost of Goods Sold	(27,000,000)
Gross profit	$13,000,000
Other income:
Income from investment in corporate stock	300,000
Interest income	20,000
Capital gains (losses)	(4,000)
Gain on fixed asset dispositions	3,000
Miscellaneous income	50,000
Gross Income	$13,369,000
Expenses:
Compensation	(7,500,000)
Stock option compensation	(200,000)
Advertising	(1,350,000)
Repairs and Maintenance	(75,000)
Rent	(22,000)
Bad debt expense	(41,000)
Depreciation	(1,400,000)
Warranty expenses	(70,000)
Charitable contributions	Moved below
Meals and entertainment	(18,000)

Goodwill impairment	(30,000)
Organizational expenditures	(44,000)
Other expenses	(140,000)
Federal income tax expense	(720,000)
Total expenses before charitable contribution, NOL, DRD, and DPAD deduction	(11,610,000
Income before charitable contribution, DRD, and DPAD	$1,759,000
Charitable contributions	(500,000)
Taxable income before DRD and DPAD
Dividends received deduction (DRD)
Domestic production activities deduction
Book/Taxable income	$1,259,000