Michael Smith has provided you with the current years income statement for Palo Alto, Inc. In the attached spreadsheet, reconcile book income to taxable income

Palo Alto, Inc. Income Statement Current Year Book - Tax Adjustments (DR) Taxable income Book Income/(Loss) $64,800,000 -45,600,000 $19,200,000 75,000 (1) 80,000 $19,355,000 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 -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 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 (8) This includes $10,000 of Politial Contributions