1. Johnson Corporation (JC), a calendar year, accrual basis taxpayer, reported $400,000 net income after tax on its financial statements prepared in accordance with GAAP. JCs books and records for the year indicate the following activity:

• JC used a reserve method for calculating bad debt expense for book purposes. The current year bad debt expense per books was 30,000. Actual write-offs during the year were 22,000.

• JC earned 5,000 muni interest income and 3,000 corporate bond interest during the year.

• JCs book depreciation expense was 44,000, and its MACRS depreciation deduction was 30,000.

• JC paid the EPA an environmental fine of 10,000.

• JCs balance sheet reflected an unearned revenue balance as of December 31 of 60,000. The beginning balance in the unearned revenue account was -0-.

• JCs federal income tax expenses per books was 110,000

• A. Compute JCs taxable income and regular tax liability.

• B. Complete a Schedule M-1, page 6, Form 1120, reconciling JCs book and taxable income.