Book Income

Account Title Debit Credit

Net sales $3,650,000

Dividends received 25,000(1)

Interest income 18,000(2)

Gain on sale of stock 6,000(3)

Key-person life insurance proceeds 110,000

Cost of goods sold $2,150,000

Salaries and wages 480,000

Bad debts 9,000(4)

Payroll taxes 85,000

Interest expense 30,000(5)

Charitable contributions 80,000(6)

Depreciation 55,000(7)

Other expenses 70,000(8)

Federal income taxes 152,198

Net income 697,802

Total $3,809,000 $3,809,000

The following additional information applies.

1.

Dividends were from

SaturnSaturn

Corporation, a 30%-owned domestic corporation.

2.

Interest revenue consists of interest on corporate bonds,

$ 10 comma 000$10,000;

and municipal bonds,

$ 8 comma 000$8,000.

3.

The stock is a capital asset held for three years prior to sale.

4.

RaymondRaymond

uses the specific writeoff method of accounting for bad debts.

5.

Interest expense consists of

$ 28 comma 000$28,000

interest incurred on funds borrowed for working capital and

$ 2 comma 000$2,000

interest on funds borrowed to purchase municipal bonds.

6.

RaymondRaymond

paid all contributions in cash during the current year to State University.

7.

RaymondRaymond

calculated depreciation per books using the straight-line method. For income tax purposes, depreciation amounted to

$ 110 comma 000$110,000.

8.

Other expenses include premiums of

$ 7 comma 000$7,000

on the key-person life insurance policy covering

RaymondRaymond's

president, who died in December.

9.

Rocket has a

$ 6 comma 000$6,000

Requirement a. Complete the worksheet to reconcile

RaymondRaymond's

book income with its taxable income (before special deductions).

Begin by entering the adjustments needed to reconcile

RaymondRaymond's

book income with its taxable income before special deductions, then, complete the worksheet by computing the taxable amount. (If an input field is not used in the table, leave the input field empty; do not enter a zero.)

Raymond Corporation Reconciliation of Book Income to Taxable Income before Special Deductions
				Book income					Adjustments
Account Title			Debit			Credit			Debit		Credit
Net sales						$3,650,000
Dividends						25,000
Interest						18,000			8,000
Gain on sale of stock						6,000
Key-person life insurance proceeds						110,000			110,000
Cost of goods sold			$2,150,000
Salaries and wages			480,000
Bad debts			9,000
Payroll taxes			85,000
Interest expense			30,000								2,000
Charitable contributions			80,000								4,000
Depreciation			55,000						55,000
Other expenses			70,000								7,000
Federal income taxes			152,198								152,198
Net income/Taxable income
before special deductions			697,802								7,802
Total			$3,809,000			$3,809,000			$173,000		$173,000

Taxable income
Debit		Credit
		3,650,000
		25,000
		10,000
		6,000
2,150,000
480,000
9,000
85,000
28,000
76,000
110,000
63,000
690,000
$3,691,000		$3,691,000

Requirement b. Prepare a tax provision reconciliation. Assume a

2121%

corporate tax rate. (Use parentheses or a minus sign for numbers to be subtracted.)

First, select the formula labels and enter the amounts to compute the net income after permanent differences. Then, select the labels and enter the amounts to compute the taxable income.

NOL carryover from prior years.