Timpanogos Incorporated is an accrual-method, calendar-year corporation. For 2022, it reported financial statement income after taxes of $1,585,900. Timpanogos provided the following information relating to its 2022 activities:

Life insurance proceeds as a result of CEO's death	$ 236,000
Revenue from sales (for both book and tax purposes)	2,360,000
Premiums paid on the key-person life insurance policies. The policies have no cash surrender value.	24,600
Charitable contributions	212,400
Cost of goods sold for book and tax purposes	354,000
Interest income on tax-exempt bonds	47,200
Interest paid on loan obtained to purchase tax-exempt bonds	53,100
Rental income payments received and earned in 2022	18,600
Rental income payments received in 2021 but earned in 2022	11,800
Rental income payments received in 2022 but not earned by year-end	35,400
Tax depreciation	64,000
Book Depreciation	28,600
Net capital loss	49,200
Federal income tax expense for books in 2022	365,800

Required:

a. 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.

b. Identify each book-tax difference as either permanent (P) or temporary (T).

c. Complete Schedule M-1 for Timpanogos.

d. Compute Timpanogos Incorporated's tax liability.

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	$2,360,000					$2,360,000
Cost of goods sold	354,000					354,000
Gross profit	$2,714,000					$2,714,000
Other income:
Life insurance proceeds from CEOs death	236,000	236,000	P			0
Interest income on tax-exempt bonds	47,200	47,200	P			0
Rental income	30,400
Gross income	$3,027,600					$2,714,000
Expenses:
Interest paid to obtain tax-exempt bonds
Net capital loss
Depreciation
Life insurance premiums
Federal income tax expense
Total expenses before charitable contribution, NOL, and DRD	0					0
Income before charitable contribution, NOL, and DRD
NOL carryover from prior year
Taxable income for charitable contribution limitation purposes						$0
Charitable contributions (after 10% limit)
Book/Taxable income	$0	$283,200		$0		$0

Step 2:

Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return
1. Net income (loss) per books
2. Federal income tax per books
3. Excess of capital losses over capital gains
4. Income subject to tax not recorded on books this year (itemize):
Rental income
5. Expenses recorded on books this year not deducted on this return (itemize):
a. Depreciation
b. Charitable contributions
c. Travel and entertainment
Interest paid to obtain tax-exempt bonds
Life insurance premiums
6. Total	0
7. Income recorded on books this year not included on this return (itemize):
Tax-exempt interest
Life insurance proceeds from CEOs death
8. Deductions on this return not charged against book income this year (itemize):
a. Depreciation
b. Charitable contributions
Section 263A costs
9. Total	$0
10. Income

Step 3:

Compute Timpanogos Incorporateds tax liability.