Book Income Adjustments Tax Income Sales 980,000 980,000 Sales Return & Allowance (10,000) Cost of Goods Sold (110,000) (10,000) (110,000) Gross Profit 860,000 860,000 Dividend Income 15,000 Interest Income 5,000 Gross Income 880,000 15,000 5,000 880,000 Compensation 600,000 600,000 Depreciation 10,000 10,000 Bad Debt Expense 14,000 14,000 Meals (50%) 1,000 1,000 Question #2 To the left is the profit and loss statement for Oak Hill Limited Partners. Oak Hill LP is involved with landscaping across the Carolinas. They own mutliple lawnmowers, leaf blowers, and various other equipment. They also lease several other large items and pay interest expense on those items. During the year Oak Hill purchased a few new machines. Their total MACRS depreciation for all old and new equipment is $17000. They elected out of bonus depreciation and decided not to take section 179 expense. The interest income consist of $3,000 from a money market account and $2,000 from Greensboro City bonds. The company wrote off $6,000 in accounts receivable as uncollectible during the year. The controller has asked that you calculate their taxable income for the year. Please complete the schedule M-1 below. Columns A-D are a guide to help you complete the M-1. Maintenance 8,000 8,000 Interest 1,000 1,000 Property Taxes 7,000 7,000 Schedule M-1 Reconciliation of Income (loss) per books with Income (loss) per Return Charitable contributions 10,000 10,000 1 Net Income (loss) per books 6 Other Taxes 30,000 30,000 2 Income inlcuded on Schedule K, Lines 1, 2, 3c, Rent 28,000 28,000 5,6a, 78, 9a, 10 and 11, not recorded on Income recorded on books this year not included on schedule K, Lines 1 through 11 (itemize): a. tax exempt interest Advertising 14,000 14,000 books this year (itemize): Professional Services 11,000 11,000 3 Employee Benefits 12,000 12,000 Guaranteed Payments (other than health insurance)....... 7 Deductions included on Schedule K, Lines 1 Supplies 3,000 Other Expenses 21,000 Total Expense Net Income 770,000 3,000 21,000 770,000 110,000 110,000 Expenses recorded on books this year not included on Schedule K lines 1 through 13d, and 21 (itemize) a. Depreciation through 13d, and 21, not charged against book income this year (itemize): a. depreciation add lines 6 and 7 B. Travel and Entertainment 5 Add Lines 1 through 4 9 income (loss)(analysis of net income (loss), line 1). Subtract line 8 from line 5 Note: Make sure your totals are in the green boxes above. There are formulas in the m-1 to help with the calculations