Question
Cramer Corporation, a calendar year, accrual basis corporation, reported $1.45 million of net income after tax on its 2020 financial statements prepared in accordance with
Cramer Corporation, a calendar year, accrual basis corporation, reported $1.45 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 $209,000.
- Cramer's book income included $19,000 of dividends received from a domestic corporation in which Cramer owns a 25 percent stock interest, and $8,500 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.
- Cramer recognized $19,000 of capital losses this year and no capital gains.
- Cramer recorded $12,600 of book expense for meals and $14,500 of book expense for entertainment costs.
- Cramer's depreciation expense for book purposes totaled $409,000. MACRS depreciation was $475,000.
Required:
- Compute Cramer's federal taxable income and regular tax liability.
- Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramers book and taxable income.
Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramers book and taxable income. (Any Expenses (Line 5) and Deductions (Line 8) that are not included under Depreciation, Charitable Contributions, and Travel and Entertainment should be combined in the corresponding line item Other. Enter all amounts as positive. Enter your answers in whole dollars not in millions.)
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