ACC 460, FALL 2018

PROBLEM 4

C CORPORATION BOOK-TO-TAX RECONCILIATION.Sox Corporation, an accrual basis, calendar-year C corporation, began operations on January 2, 2010.For each item below, determine the 2018 Schedule M-1 adjustment to reconcile book income to taxable income, i.e., the amount and the effect ( + or -).

Net income per books

$700,000

Provision for Federal income taxes, $190,000

Municipal bond interest, $10,000

During 2018, Sox increased its allowance for uncollectible accounts by $18,000; actual bad debts written off in 2018 were $20,000.

Sox reported depreciation for financial purposes of $75,000; MACRS (including 179) for the year was $90,000

Sox acquired another corporation in 2016, paying $300,000 for goodwill.Sox recorded a goodwill impairment loss of $50,000 for financial purposes in 2018.

In December 2017, Sox received $25,000 as an advance payment for an order from a customer.Sox reported the $25,000 as a liability (unearned income) on its balance sheet at 12/31/17 and as earned income in 2018.

In December 2018, Sox received $40,000 as an advance payment for an order from a customer.Sox reported the $40,000 as a liability (unearned income) on its balance sheet at 12/31/18.

Sox reported gains of $20,000 and losses of $28,000 from the sale of investments in its "Other Revenues & Expenses" section of its income statement.

Sox deducted a $10,000 excess charitable contribution carryover from 2017 on its 2018 tax return.

Sox received dividend income from a 15%-owned corporation totaling $60,000.

In May 2018, Sox paid a $10,000 fine to a local government for violating a local ordinance.

Taxable Income