Gosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information: Gosling earned $3,500 on an investment in tax-exempt municipal bonds. Gosling received an advance payment of rent this year for $25,000. This amount was not included in book income. Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000. Gosling recorded $58,000 of business meals and $27,000 of entertainment expense for book purposes. Gosling's federal income tax expense per books was $220,000. a. Compute Gosling's taxable income and regular tax liability. b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income. 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 2 Federal income tax per books not included on this return (itemize 3 Excess of capital losses over capital gains Tax-exempt interests 4 Income subject to tax not recorded on books this year (itemize): 8 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation S a Depreciation b Charitable contributions S b Charitable contributions c Travel and entertainment S 9 Add lines 7 and 8 6 Add lines 1 through 5. 10 Income (page 1, line 28)-line 6 less line 9 Gosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information: Gosling earned $3,500 on an investment in tax-exempt municipal bonds. Gosling received an advance payment of rent this year for $25,000. This amount was not included in book income. Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000. Gosling recorded $58,000 of business meals and $27,000 of entertainment expense for book purposes. Gosling's federal income tax expense per books was $220,000. a. Compute Gosling's taxable income and regular tax liability. b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income. 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 2 Federal income tax per books not included on this return (itemize 3 Excess of capital losses over capital gains Tax-exempt interests 4 Income subject to tax not recorded on books this year (itemize): 8 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation S a Depreciation b Charitable contributions S b Charitable contributions c Travel and entertainment S 9 Add lines 7 and 8 6 Add lines 1 through 5. 10 Income (page 1, line 28)-line 6 less line 9
