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Cramer Corporation, a calendar year, accrual basis corporation, reported $1.25 million of net income after tax on its 2020 financial statements prepared in accordance with

Cramer Corporation, a calendar year, accrual basis corporation, reported $1.25 million of net income after tax on its 2020 financial statements prepared in accordance with GAAP. The corporations books and records reveal the following information:

  • Cramer's federal income tax expense per books was $205,000.
  • Cramer's book income included $15,000 of dividends received from a domestic corporation in which Cramer owns a 25 percent stock interest, and $6,500 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.
  • Cramer recognized $15,000 of capital losses this year and no capital gains.
  • Cramer recorded $10,600 of book expense for meals and $12,500 of book expense for entertainment costs.
  • Cramer's depreciation expense for book purposes totaled $405,000. MACRS depreciation was $475,000.

Required:

  1. Compute Cramer's federal taxable income and regular tax liability.
  2. Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramers book and taxable income. image text in transcribed
0 Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books 7 Income recorded on books this year not included on 2 Federal income tax per books this return (itemize): 3 Excess of capital losses over capital gains Tax-exempt interest 4 Income subject to tax not recorded on books this year (itemize): 0 5 Expenses recorded on books this year not deducted on 8 Deductions on this return not charged against book this return (itemize): income this year (itemize): a Depreciation a Depreciation b Charitable contributions b Charitable contributions C Travel and entertainment c Other (include all items) d Other (include all items) 09 Add lines 7 and 8 6 Add lines 1 through 5 0 10 Income (page 1, line 28) - line 6 less line 9 000

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