Requirements: For this assignment, you must submit your reconciliation along with all of the supporting calculations. No credit will be given if the supporting calculations are not shown. You can submit your answers either on a printed spreadsheet or handwritten (be sure to write legibly). Objective 7 in Chapter 1 of the book will be very useful for completing this assignment. Required (Round everything to whole numbers): 1. Prepare in good form a schedule that calculates ABCs net income per books (after taxes) for 2014. 2. Prepare in good form a separate schedule or a column within the schedule from #1 that calculates ABCs taxable income and tax liability. 3. Identify and categorize differences between pre-tax book income and taxable income as permanent or temporary differences. 4. Prepare a roll-forward of all deferred tax assets and liabilities. Show the beginning asset/liability, the beginning cumulative difference, the change from this year, the ending cumulative difference, the ending asset/liability and the change. Also categorize all deferred tax assets and liabilities as current or non-current. 4. Prepare the book journal entry/entries to record tax expense including current and deferred tax expense. 5. Reconcile net income per books to taxable income before the dividends received deduction (but after USPAD and CCD) by preparing a Schedule M-1 (which is on page 5 of the Form 1120 and can be found in your course-pack or at www.IRS.gov). Show the details behind any summations used on this form (i.e. tell me what line items add up to your numbers). Reconciliation of Book to Taxable Income The books of ABC Corporation, a domestic manufacturer, showed the following for 2014: Gross Sales $ 246,570,000 Cost of goods sold 215,940,000 Short term capital loss on sale of Lowes stock 20,000 Meals and entertainment costs 49,000 Salaries and other operating expenses 1,230,000 Cash contributions to qualified public charities 3,350,000 Depreciation expense for tax (for books=190,000) 618,000 Dividend income on DEF Corp. stock25% ownership 1,300,000 Advance interest payments received for loans made to other companies: (received on 03/1/14, $10,000 per month) 110,000 Long-term capital gain on sale of Oracle stock 94,000 Prepaid interest expense on outstanding debt: (paid on 10/1/14, $25,000 per month) 250,000 Bad debt expense for book purposes: ($60,000 in bad debts were actually written off this year) 42,000 Life insurance premiums on the CEO (ABC is the beneficiary) 14,000 Long-term capital loss on sale of Fake Company stock 132,000 Interest income on California School District Bonds 59,000 Additional Information: 1. ABC operates on a calendar year and keeps its books in accordance with GAAP. ABC is an accrual-basis taxpayer. 2. ABCs QPAI for the year was $14,500,000. Its W-2 wages from USPAD eligible activities are $5,000,000. 3. ABC did not recognize any capital gains during the prior three years but expects to have a net capital gain before any carry forwards in 2016 of over $100,000. The company expects to have sufficient income in 2017 and 2018 to be able to deduct any current year (and prior year) excess charitable contributions. 4. Assume ABC expects to remain in the same tax bracket for the next several years and does not expect any changes in corporate tax rates. ABCs marginal tax rate in 2013 was 35%. No valuation allowance is necessary for any deferred tax assets. 5. ABCs beginning of year deferred tax assets and liabilities are as follows: Depreciation $445,000 DTL Bad Debt $7,000 DTA Prepaid Interest Income $35,000 DTA Charitable Contributions $510,000 DTA