Timpanogos Incorporated is an accrual-method, calendar-year corporation. For 2021, it reported financial statement income after taxes of $1,529,880. Timpanogos provided the following information relating to its 2021 activities:

Life insurance proceeds as a result of CEOs death	$ 228,000
Revenue from sales (for both book and tax purposes)	2,280,000
Premiums paid on the key-person life insurance policies. The policies have no cash surrender value.	23,940
Qualified charitable contributions	205,200
Cost of goods sold for book and tax purposes	342,000
Interest income on tax-exempt bonds	45,600
Interest paid on loan obtained to purchase tax-exempt bonds	51,300
Rental income payments received and earned in 2021	17,100
Rental income payments received in 2020 but earned in 2021	11,400
Rental income payments received in 2021 but not earned by year-end	34,200
Tax depreciation	62,700
Book Depreciation	28,500
Net capital loss	47,880
Federal income tax expense for books in 2021	353,400

Required:

1. Reconcile book income to taxable income for Timpanogos Incorporated. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income.
2. Identify each book-tax difference as either permanent (P) or temporary (T).
3. Complete Schedule M-1 for Timpanogos.
4. Compute Timpanogos Incorporateds tax liability for 2021.

• eq A and B
• Schedule M1
• Req D

Reconcile book income to taxable income for Timpanogos Incorporated. 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. Leave no answer blank. Enter zero if applicable.)

Description	Book Income (Dr) Cr	Book-tax adjustments (Dr)	Permanent (P) or Temporary (T)	Book-tax adjustments Cr	Permanent (P) or Temporary (T)	Taxable Income (Dr) Cr
Revenue from sales	$2,280,000	23,940	P	23,940	T
Cost of goods sold		51,300	P	51,300	P
Gross profit	$2,280,000					$0
Other income:
Life insurance proceeds from CEOs death	228,000	(228,000)	P	28,500	P
Interest income on tax-exempt bonds			P	353400	T
Rental income			T	34,200	T
Gross income	$2,508,000					$0
Expenses:
Interest paid to obtain tax-exempt bonds		(45,600)	P	51,300	P
Net capital loss			T	47,880	T
Depreciation			T	28,500	P	(62,700)
Life insurance premiums		(228,500)	P		P
Federal income tax expense			T	353,400	P
Total expenses before charitable contribution, NOL, and DRD	0					(62,700)
Income before charitable contribution, NOL, and DRD
NOL carryover from prior year			T		P
Taxable income for charitable contribution limitation purposes			T		P	$0
Charitable contributions		205,200	T			192,090
Book/Taxable income	$0	$(176,700)		$538,080		$192,090