Assignment Choice #2: M-1 and M-2 Calculations

Part I: M-1 Information for an accrual basis corporation

Net income per books (after-tax)	$174,100
Federal income tax expense per books	$86,600
Tax-exempt interest income	$4,500
MACRS depreciation**	$7,200
Excess of capital loss over capital gains	$9,400
Nondeductible meals and entertainment	$5,500
Interest on loan to purchase tax-exempt bonds	$1,100

** This is depreciation in excess of straight-line depreciation used for financial statement purposes.

Part II: M-2 Information for an accrual basis corporation

Net income per books (after-tax)	$386,250
Taxable income	$120,000
Federal income tax per books	$30,050
Cash dividend distributions	$150,000
Unappropriated retained earnings, as of January 1, 2013	$796,010

Requirements:

Clearly identify the requirements being addressed by preparing Schedule M-1 and Schedule M-2 of Form 1120. Show all calculations within the cells of an Excel spreadsheet.

Note: You are not required to complete Schedules M-T and M-2 berow if one totalassets on line T5. corumn of Schedule Lare ress ian 325,000 Schedule M-1 Reconciliation of Income (Log per Booke With Income per Return See e 16 of instructions 1 Net income (loss) per books 7 Income recorded on books this year not included on this return (itemize) 2 Federal income tax Tax-exempt interest 3 Excess of capital losses over capital gains 4 Income subject to tax not recorded on books this year (itemize 8 Deductions on this retum not charged against book income this year s Expenses recorded on books this year not deducted on this retum (itemize a Depreciation a Depreciation b Contributions camyover b Contributions carryover o Travel and entertainment 9 Add lines 7 and 8 Add lines 1 through 5 10 Income line 28 page 1)-Hine 6 less line 9 Schedule M-2 Ana e of Unappropriated Retained Earninge per Booke Line 25, Schedule L 1 Balance at beginning of year 5 Distributions a Cash 2 Net income (loss) per books b Stock 3 Other increases (itemize) a Property 6 Other dea eases (itemize Add lines 5 and 6 Add lines 1, 2, and 3 8 Balance at end of ne 4 less line