XYZ it's a Calendar your corporation that begin business on January 1, 2021. For the year, it reported the information that follows its current your audit income statement. Notes with important tax information are provided as well. Required:A. Reconcile book income to taxable income and identify each book tax difference as temporary or permanent.B. Complete XYZ's schedule M-1.C. Complete XYZ's form 1120, page 1. Ignore estimated penalties when completing the form.
CoursHeroTranscribedText: BUUR For current year Income Revenue from sales $40,000,080 Cost of Goods Sold (27 000,000) Gross profit $13,000,000 Other Income: Income from investment in 300,000 corporate stock Interest income 20,0002 Capital gains (losses) (4,000) Gain or loss from 3,0003 disposition of fixed assets Miscellaneous income 50 000 Gross Income $13,369,000 Expenses: Compensation (7,500,000) Stock option compensation (200,000)s Advertising (1,350,000) Repairs and Maintenance (75,000) Rent (22,000) Bad Debt expense (41,000) Depreciation (1,400,000)7 Warranty expenses (70,000) Charitable donations (500,000) Meals (all at restaurants) (18,000) Goodwill impairment (30,000)10 Organizational expenditures (44,000) 11 Other expenses (140.000)12 Total expenses ($11 390 000) Income before taxes $1,979,000 Provision for income taxes (400 000)13 Net Income after taxes $1,579,000 Notes: 1. XYZ owns 30% of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC's earnings. Of the $20,000 interest income, $5,000 was from a City of Seattle bond, $7,000 was from a Tacoma City bond, $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as $1231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). XYZ actually wrote off $27,000 of its accounts receivable as uncollectible. Tax depreciation was $1,900,000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $500,000 of cash contributions to charities during the year. The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation. 10, On July 1 of this year XYZ ac iness. In the process, is acquired $300,000 of goodwi and of the year, XYZ wrote off $30,000 of the goodwill as impaired. 11. XYZ expensed all of its or poses. XYZ expensed the maximum amount d for tax purposes. 12, The other expenses do 13, This is an estimated tax on (federal tax expense) for the year. Assume that XYZ is not subject to state incom
