Hello, I'm looking for some help with filling out a Schedule M-1 for my tax class at the bottom of this post. It is based on our previous weeks assignment which you will find below labeled "Completed week 2 assignment."
The assignment is as follows: Based on the book income to taxable income reconciliation you completed in week 2 (image below), use the attached spreadsheet to complete Palo Alto's Schedule M-1.
Completed week 2 assignment:
Blank Schedule M-1 that I need help filling out:
Palo Alto, Inc. Income Statement Current Year Book - Tax Adjustments (DR) Cr Book Income/(Loss) 64,800,000 -45,600,000 $19,200,000 Taxable income 64,800,000 -45,600,000 $19,200,000 -25,000 75,000 (1) 80,000 $19,355,000 50,000 80,000 $19,330,000 -9,630,000 350,000 Revenue from sales Cost of Goods Sold Gross profit Other income: Interest income Miscellaneous income Gross Income Expenses: Compensation Stock option compensation Advertising Repairs and Maintenance Rent Bad debt expense Depreciation Warranty expenses Meals and entertainment Life insurance premiums Federal income tax expense Other expenses Total Expenses Net Income 15,000 -9,630,000 (2) -350,000 (3) -1,950,000 -658,000 -857,000 -50,000 (4) -1,750,000 (5) -95,000 (6) -60,000 -25,000 (7) -1,250,000 -350,000 (8) -$17,025,000 $2,330,000 -1,950,000 -658,000 -857,000 -35,000 -2,300,000 0 -30,000 0 -550,000 95,000 30,000 25,000 1,250,000 10,000 0 -340,000 -$15,800,000 $3,530,000 Notes (1) of the $75,000 interest income, $25,000 is from California State municipal bond. (2) This includes total officer compensaiton of $2,950,000 (no one officer received more than $1,000,000 compensation). (3) This amount is the portion of incenctive stock option compensation that was expensed during the year (recepiants are officers). (4) Palo Alto wrote off $35,000 of its accounts receivable as uncollectible. (5) Tax depreciation for the year was $2,300,000. (6) In the current year, Palo Alto did not make any actual payments on warranties it provided to customers. (7) Premiums on key employee life insurance policies (8) This includes $10,000 of Politial Contributions. Palo Alto, Inc. Schedule M-1 1 Net income per books 2 Federal income tax per books 3 Excess of capital losses over capital gains Income subject to tax not recorded on books 4 this year (itemize) Expenses recorded on books this year not 5 deducted on this return a. Depreciation b. Contributions carryover c. Travel and entertainment 6 Add lines 1 through 5 so Income recorded on books this year not 7 included on this return a. Tax exempt interest Deductions on this retur not charged against 8 book income this year a. Depreciation b. Contributions carryover 9 Add lines 7 and 8 10 Income (line 28, page 1) - line 6 less line 9 so
