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C:3-67 Permtemp Corporation (EIN: XX-1234567) formed in 2019 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales Cost of goods sold Gross profit Dividend income Tax-exempt interest income Total income Expenses: Depreciation Bad debts $20,000,000 (15,000,000) For 2020, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales Expenses: Depreciation Bad debts Cost of goods sold Gross profit $ 5,000,000 50,000 Dividend income 15,000 Tax-exempt interest income Total income $ 5,065,000 $ 800,000 400,000 Charitable contributions 100,000 Interest 475,000 Meals and entertainment Other Total expenses Net loss before federal income taxes Cash Accounts receivable Charitable contributions Interest Meals and entertainment Other Total expenses 45,000 3,855,000 (5,675,000) $ (610,000) Net income before federal income taxes $33,000,000 (22,000,000) $11,000,000 55,000 15,000 $11,070,000 800,000 625,000 40,000 455,000 60,000 4,675,000 (6,655,000) $ 4,415,000 $ 500,000 $ 2,000,000 Cash Allowance for doubtful accounts (250,000) Inventory 1,750,000 4,000,000 Accounts receivable Fixed assets Accumulated depreciation Investment in corporate stock Investment in tax-exempt bonds $10,000,000 (800,000) 9,200,000 1,000,000 Total assets Accounts payable Long-term debt Common stock Retained earnings Total liabilities and equity $ 2,125,000 Allowance for doubtful accounts $ 3,300,000 (450,000) 2,850,000 Inventory 6,000,000 $10,000,000 Accumulated depreciation (1,600,000) 8,400,000 1,000,000 50,000 50,000 $16,500,000 $ 2,610,000 8,500,000 6,000,000 (610,000) $16,500,000 Fixed assets Investment in corporate stock Total assets Investment in tax-exempt bonds Accounts payable Long-term debt Common stock Retained earnings $20,425,000 $ 2,120,000 8,500,000 6,000,000 3,805,000 $20,425,000 Additional information for 2019: The investment in corporate stock is comprised of less-than-20%-owned corporations. Depreciation for tax purposes is $1.4 million under MACRS. Bad debt expense for tax purposes is $150,000 under the direct writeoff method. Because of limitations, none of the charitable contributions will be deductible for tax purposes. Assume that $25,000 of the $45,000 meals and entertainment expenses pertained to entertainment and $20,000 pertained to business meals. Because of limitations effec- tive in 2019, $35,000 of the meals and entertainment expenses will be disallowed for tax purposes. The corporate tax rate in 2019 was 21%. Required for 2019: a. Prepare page 1 of the 2019 Form 1120, computing the corporation's NOL. b. Determine the corporation's deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP ac- counting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2019 Form 1120. c. Prepare the 2019 Schedule M-3 for Form 1120. d. Prepare a schedule that reconciles the corporation's effective tax rate to the statutory 21% tax rate. Additional information for 2020: Assume that $40,000 of the $60,000 meals and entertainment expenses pertained to entertainment and $20,000 pertained to business meals. Because of limitations effec- tive in 2020, $50,000 of the meals and entertainment expenses will be disallowed for tax purposes. Depreciation for tax purposes is $2.45 million under MACRS. Bad debt expense for tax purposes is $425,000 under the direct writeoff method. The corporate tax rate in 2020 is 21%. Required for 2020: a. Prepare page 1 of the 2020 Form 1120, computing the corporation's taxable income and tax liability. b. Determine the corporation's deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP ac- counting ASC 740. Use the balance sheet information to prepare Schedule L of the 2020 Form 1120. c. Prepare the 2020 Schedule M-3 for Form 1120. d. Prepare a schedule that reconciles the corporation's effective tax rate to the statutory 21% tax rate.