For 2017, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expenses, 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 $ 800,000 Bad Debts 625,000 Charitable Contr 40,000 Interest 455,000 Meals Entertainment 60,000 Other 4,675,000 Total Expenses (6,655,000) Net loss before federal income taxes $4,415,000 Cash $2,125,000 Accounts receivable $3,300,000 Allowance for doubtful (450,000) 2,850,000 Inventory 6,000,000 Fixed Assets $10,000,000 Acc depr (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 Total Liabilities and equity $20,425,000 Additional information for 2017 Because of limitations, $30,000 of the meals and entertainment expenses will be disallowed for tax purposes Depreciation for tax purposes is $2 45 million under MACRS Bad debt expense for tax purposes is $425,000 under the direct writeoff method Ignore the U S production activities deduction The corporate tax rate in 2017 was 34 At the end of 2017, Congress reduced the corporate tax rate to 21 effective for 2018 Required for 2017 Prepare page 1 of the 2017 Form 1120, computing the corporations taxable income and tax liability 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 ASC 740 Because of the enacted tax rate change, deferred assets and liabilities in the end of 2017 will need to be value at 21 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 This schedule will need a line to reflect the change in the future tax rate

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Posted on Jan 18, 2021

For 2017, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expenses, deferred tax assets, and deferred tax liabilities:

For 2017, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expenses, 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 $ 800,000
Bad Debts 625,000
Charitable Contr. 40,000
Interest 455,000
Meals & Entertainment 60,000
Other 4,675,000
_______________
Total Expenses (6,655,000)
___________
Net loss before federal income taxes $4,415,000
============
Cash $2,125,000
Accounts receivable $3,300,000
Allowance for doubtful (450,000) 2,850,000
_________
Inventory 6,000,000
Fixed Assets $10,000,000
Acc. depr. (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
__________
Total Liabilities and equity $20,425,000
===========
Additional information for 2017:
Because of limitations, $30,000 of the meals and entertainment expenses will be disallowed for tax purposes.
Depreciation for tax purposes is $2.45 million under MACRS
Bad debt expense for tax purposes is $425,000 under the direct writeoff method.
Ignore the U.S. production activities deduction.
The corporate tax rate in 2017 was 34%.
At the end of 2017, Congress reduced the corporate tax rate to 21% effective for 2018.
Required for 2017:
Prepare page 1 of the 2017 Form 1120, computing the corporation’s taxable income and tax liability.
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. Because of the enacted tax rate change, deferred assets and liabilities in the end of 2017 will need to be value at 21%. 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 corporation’s effective tax rate to the statutory 34% tax rate. This schedule will need a line to reflect the change in the future tax rate.