Permtemp Corporation formed in 2017 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expenses, 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 $ 800,000 Bad Debts 400,000 Charitable Contributions 100,000 Interest 475,000 Meals Entertainment 45,000 Other 3,855,000 Total Expenses (5,675,000) Net loss before federal income taxes $ (610,000) Cash $ 500,000 Accounts receivable $2,000,000 Allowance for doubtful (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 bonds 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 and equity $16,500,000 Additional information for 2017 The investment in corporate stock is comprised of less than 20 owned corporations The dividends received deduction percentage in 2017 were 70 for less than 20 owned property Depreciation for tax purposes is $1 4 million under MACRS Bad debt expenses for tax purposes is $150,000 under the direct writeoff method Because of limitations, none of the charitable contributions will be deductible for tax purposes, and $22,500 of the meals and entertainment expenses will be disallowed for tax purposes Ignore the U S production activities deduction The corporate tax rate in 2017 was 34 Required for 2016 Prepare page 1 of the 2017 For 1120, computing the corporations NOL Determine the corporations deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740 Use the balance sheet information to prepare Schedule L of the 2017 Form 1120 Prepare the 2017 Schedule M 3 for Form 1120 Prepare a schedule that reconciles the corporations effective tax rate to the statutory 34 tax rate

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 08, 2024

Permtemp Corporation formed in 2017 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expenses, deferred

Permtemp Corporation formed in 2017 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expenses, 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 $ 800,000

Bad Debts 400,000

Charitable Contributions 100,000

Interest 475,000

Meals & Entertainment 45,000

Other 3,855,000

Total Expenses (5,675,000)

Net loss before federal income taxes $ (610,000)

Cash $ 500,000

Accounts receivable $2,000,000

Allowance for doubtful (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 bonds 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 and equity $16,500,000

Additional information for 2017:

The investment in corporate stock is comprised of less-than-20%-owned corporations. The dividends-received deduction percentage in 2017 were 70% for less than 20%-owned property.
Depreciation for tax purposes is $1.4 million under MACRS.
Bad debt expenses for tax purposes is $150,000 under the direct writeoff method.
Because of limitations, none of the charitable contributions will be deductible for tax purposes, and $22,500 of the meals and entertainment expenses will be disallowed for tax purposes.
Ignore the U.S. production activities deduction.
The corporate tax rate in 2017 was 34%.

Required for 2016:

Prepare page 1 of the 2017 For 1120, computing the corporations NOL.
Determine the corporations deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2017 Form 1120.
Prepare the 2017 Schedule M-3 for Form 1120.
Prepare a schedule that reconciles the corporations effective tax rate to the statutory 34% tax rate.