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Cramer Corporation, a calendar year, accrual basis corporation, reported $1.75 million of net income after tax on its financial statements prepared in accordance with GAAP.
Cramer Corporation, a calendar year, accrual basis corporation, reported $1.75 million of net income after tax on its 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 $215,000.
- Cramer's book income included $25,000 of dividends received from a domestic corporation in which Cramer owns a 25 percent stock interest, and $11,500 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.
- Cramer recognized $25,000 of capital losses this year and no capital gains.
- Cramer recorded $15,600 of book expense for meals not provided by a restaurant and $17,500 of book expense for entertainment costs.
- Cramer's depreciation expense for book purposes totaled $415,000. 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.
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