Permtemp Corporation formed in 2015 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities TAX YEAR 2015 Note For 2015 forms, go to forms and publications, previous years, at the IRS website, www irs gov For 2015, Permtemp 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 federal income taxes $ 4,415,000 Cash $ 2,125,000 Accounts receivable $ 3,300,000 Allowance for doubtful 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 stock1,000,000 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 Total liabilities and equity $20,425,000 attachment has accounts in excel spreadsheet Additional information for 2015 Depreciation for tax purposes is $2 45 million under MACRS Bad debt expense for tax purposes is $425,000 under the direct writeoff method Qualified production activities income is $3 million Required for 2015 a Prepare page 1 of the 2015 Form 1120, computing the corporation s taxable income and tax liability b Determine the corporation s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740 Use the balance sheet information to prepare Schedule L of the 2015 Form 1120 c Prepare the 2015 Schedule M 3 for Form 1120 d Prepare a schedule that reconciles the corporation s effective tax rate to the statutory 34 tax rate Sales Cost of goods sold Gross profit $33,000,000 22,000,000 $11,000,000 Dividend income Tax exempt interest income Total income Expenses Depreciation Bad debts Charitable contributions Interest Meals and entertainment Other Total expenses 55,000 15,000 $11,070,000 $800,000 625,000 40,000 455,000 60,000 4,675,000 6,655,000 Net income before federal income taxes Cash Accounts receivable Allowance for doubtful accounts Inventory Fixed assets Accumulated depreciation Investment in corporate stock Investment in tax exempt bonds Total assets Accounts payable Long term debt Common stock $4,415,000 $2,125,000 $3,300,000 (450,000) 2,850,000 6,000,000 $10,000,000 1,600,000 8,400,000 1,000,000 50,000 $20,425,000 $2,120,000 8,500,000 6,000,000 Retained earnings Total liabilities and equity 3,805,000 $20,425,000

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Permtemp Corporation formed in 2015 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred

Permtemp Corporation formed in 2015 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

TAX YEAR 2015

Note: For 2015 forms, go to forms and publications, previous years, at the IRS website, www.irs.gov.

For 2015, Permtemp 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 federal income taxes $ 4,415,000

Cash $ 2,125,000

Accounts receivable $ 3,300,000

Allowance for doubtful 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 stock1,000,000

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

Total liabilities and equity$20,425,000

*** attachment has accounts in excel spreadsheet

Additional information for 2015:

Depreciation for tax purposes is $2.45 million under MACRS.
Bad debt expense for tax purposes is $425,000 under the direct writeoff method.
Qualified production activities income is $3 million.

Required for 2015:

a.Prepare page 1 of the 2015 Form 1120, computing the corporation?s taxable income and tax liability.

b.Determine the corporation?s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Use the balance sheet information to prepare Schedule L of the 2015 Form 1120.

c.Prepare the 2015 Schedule M-3 for Form 1120.

d.Prepare a schedule that reconciles the corporation?s effective tax rate to the statutory 34% tax rate.

Sales Cost of goods sold Gross profit $33,000,000 -22,000,000 $11,000,000 Dividend income Tax-exempt interest income Total income Expenses: Depreciation Bad debts Charitable contributions Interest Meals and entertainment Other Total expenses 55,000 15,000 $11,070,000 $800,000 625,000 40,000 455,000 60,000 4,675,000 -6,655,000 Net income before federal income taxes Cash Accounts receivable Allowance for doubtful accounts Inventory Fixed assets Accumulated depreciation Investment in corporate stock Investment in tax-exempt bonds Total assets Accounts payable Long-term debt Common stock $4,415,000 $2,125,000 $3,300,000 (450,000) 2,850,000 6,000,000 $10,000,000 -1,600,000 8,400,000 1,000,000 50,000 $20,425,000 $2,120,000 8,500,000 6,000,000 Retained earnings Total liabilities and equity 3,805,000 $20,425,000