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Timpanogos Inc. is an accrual-method calendar-year corporation. For 2019, 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 2019, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2019 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 | |
Cost of goods sold for book and tax purposes | 300,000 | |
Interest income on tax-exempt bonds issued in 2018 | 40,000 | |
Interest paid on loan obtained to purchase tax-exempt bonds | 45,000 | |
Rental income payments received and earned in 2019 | 15,000 | |
Rental income payments received in 2018 but earned in 2019 | 10,000 | |
Rental income payments received in 2019 but not earned by year-end | 30,000 | |
Tax depreciation | 55,000 | |
Book Depreciation | 25,000 | |
Net capital loss | 42,000 | |
Federal income tax expense for books in 2019 | 500,000 | |
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Required:
- 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).
- Complete Schedule M-1 for Timpanogos.
- Compute Timpanogos Inc.s tax liability for 2019.
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