For 2017, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expenses, deferred tax assets, and deferred tax liabilities Sales $33,000,000 Cost of Goods Sold (22,000,000) Gross Profit $11,000,000 Dividend Income 55,000 Tax exempt Interest Income 15,000 Total Income $ 11,070,000 Expenses $ 800,000 Bad Debts 625,000 Charitable Contr 40,000 Interest 455,000 Meals Entertainment 60,000 Other 4,675,000 Total Expenses (6,655,000) Net loss before federal income taxes $4,415,000 Cash $2,125,000 Accounts receivable $3,300,000 Allowance for doubtful (450,000) 2,850,000 Inventory 6,000,000 Fixed Assets $10,000,000 Acc depr (1,600,000) 8,400,000 Investment in Corporate Stock 1,000,000 Investment in tax exempt bonds 50,000 Total Assets $20,425,000 Accounts Payable $ 2,120,000 Long term debt 8,500,000 Common Stock 6,000,000 Retained Earnings 3,805,000 Total Liabilities and equity $20,425,000 Additional information for 2017 Because of limitations, $30,000 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 Ignore the U S production activities deduction The corporate tax rate in 2017 was 34 At the end of 2017, Congress reduced the corporate tax rate to 21 effective for 2018 Required for 2017 Prepare page 1 of the 2017 Form 1120, computing the corporations taxable income and tax liability Determine the corporations deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740 Because of the enacted tax rate change, deferred assets and liabilities in the end of 2017 will need to be value at 21 Use the balance sheet information to prepare Schedule L of the 2017 Form 1120 Prepare the 2017 Schedule M 3 for Form 1120 Prepare a schedule that reconciles the corporations effective tax rate to the statutory 34 tax rate This schedule will need a line to reflect the change in the future tax rate

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Posted on Sep 15, 2024

Sales $33,000,000

Cost of Goods Sold (22,000,000) ____________ Gross Profit $11,000,000

Dividend Income 55,000

Tax-exempt Interest Income 15,000 ____________ Total Income $ 11,070,000

Expenses $ 800,000

Bad Debts 625,000

Charitable Contr. 40,000

Interest 455,000

Meals & Entertainment 60,000

Other 4,675,000 _______________

Total Expenses (6,655,000) ___________ Net loss before federal income taxes $4,415,000 ============ Cash $2,125,000

Accounts receivable $3,300,000

Allowance for doubtful (450,000) 2,850,000 _________ Inventory 6,000,000

Fixed Assets $10,000,000

Acc. depr. (1,600,000) 8,400,000

Investment in Corporate Stock 1,000,000

Investment in tax-exempt bonds 50,000 ___________ Total Assets $20,425,000 =========== Accounts Payable $ 2,120,000

Long-term debt 8,500,000

Common Stock 6,000,000

Retained Earnings 3,805,000 __________ Total Liabilities and equity $20,425,000 ===========

Additional information for 2017:

Because of limitations, $30,000 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.
Ignore the U.S. production activities deduction.
The corporate tax rate in 2017 was 34%.
At the end of 2017, Congress reduced the corporate tax rate to 21% effective for 2018.

Required for 2017:

Prepare page 1 of the 2017 Form 1120, computing the corporations taxable income and tax liability.
Determine the corporations deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Because of the enacted tax rate change, deferred assets and liabilities in the end of 2017 will need to be value at 21%. Use the balance sheet information to prepare Schedule L of the 2017 Form 1120.
Prepare the 2017 Schedule M-3 for Form 1120.
Prepare a schedule that reconciles the corporations effective tax rate to the statutory 34% tax rate. This schedule will need a line to reflect the change in the future tax rate.