Permtemp Corporation formed in 2009 and, for that year, reported the following book income statement and balnce sheet, excluding the federal income tax expense, deferred tax assets and deferred tax liabilities. Sales $20,000,000 Cost of goods sold (15,000,000 Gross Profit 5,000,000 Dividend Income 50,000 Tax-exempt interest income 15,000 Total Income 5,065,000 Expenses Depreciation $800,000 Bad Debts 400,000 Charitable Contributions 100,000 Interest 475,000 Meals and Entertainment 45,000 Other 3,855,000 Total Expenses -5,675,000 Net loss before federal incoem taxes -610,000 Cash $500,000 Accounts receivable $2,000,000 Allowance for doughtful accounts -250,000 1,750,000 Inventory 4,000,000 Fixed Assets 10,000,000 Accumulated depreciation -800,000 9,200,000 Investment in Corporate Stock 1,000,000 Investment in tax-exempt stock 50,000 Total Assets $16,500,000 Accounts payable $2,610,000 Long-term debt 8,500,000 Common stock 6,000,000 Retained earnings -610,000 Total Liabilities $16,500,000 Additional Information for 2009 1.) the investment in coporate stock is comprised of less-than-20%-owned corporations. 2.) Depreciation for tax purposes is $104 million under MACRS. 3.) Bad debt expense for tax purposes is $ 150,000 under the direct writeoff method. 4.) Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary. 5.) Qualified production activities income is zero.

For 2010, ermtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, 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 Depreciation $800,000 Bad debts 625,000 Charitable contributions 40,000 Interest 455,000 Meals and entertainment 60,000 Other 4,675,000 Total Expenses -6,655,000 Net Income before taxes $4,415,000 Cash $3,300,000 Allowance for doughtful accounts -450,000 2,850,000 Inventory 6,000,000 Fixed assets $10,000,000 Accumulated depreciation -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 $20,425,000 Additional information for 2010: Depreciation for tax purposes is $2045 million under MACRS. Bad debt expense for tax purposes is $425,000 under the direct writeoff method. Qualified production activities income is $3 million.

a.) Prepare page 1 of the 2010 from 1120, computing the corporation's taxable income and tax liability.

B.) Prepare the 2010 Schedule M-1 and M-2 for Form 1120