Question
Timpanogos Inc. is an accrual-method calendar-year corporation. For 2017, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to
Timpanogos Inc. is an accrual-method calendar-year corporation. For 2017, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2017 activities:
Life insurance proceeds as a result of CEOs death | $ | 200,000 |
Revenue from sales (for both book and tax purposes) | 2,000,000 | |
Premiums paid on the key-person life insurance policies. The policies have no cash surrender value. | 21,000 | |
Charitable contributions | 180,000 | |
Overhead costs that were expensed for book purposes but are included in ending inventory for tax purposes under 263A | 50,000 | |
Overhead costs that were expensed for book purposes in 2016 but were included in 2016 ending inventory. All 2016 ending inventory was sold in 2017. | 60,000 | |
Cost of goods sold for book purposes | 300,000 | |
Interest income on private activity tax-exempt bonds issued in 2016. | 40,000 | |
Interest paid on loan obtained to purchase tax-exempt bonds | 45,000 | |
Rental income payments received and earned in 2017 | 15,000 | |
Rental income payments received in 2016 but earned in 2017 | 10,000 | |
Rental income payments received in 2017 but not earned by year-end | 30,000 | |
MACRS depreciation | 55,000 | |
Book Depreciation | 25,000 | |
Alternative minimum tax depreciation | 50,000 | |
Net capital loss | 42,000 | |
Federal income tax expense for books in 2017 | 500,000 | |
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Timpanogos did not qualify for the domestic production activities deduction. Required:
Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income.
Identify each book-tax difference as either permanent (P) or temporary (T).
a & b. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income. Identify each book-tax difference as either permanent (P) or temporary (T). (Negative amounts should be indicated by a minus sign.)
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