Your tax senior has e-mailed you Oh Gnome You Didn't, Inc.'s GAAP-basis trial balance and financial statements for the 2018 calendar year, prepared using Microsoft Excel, and has asked you to convert Gnome's book income into taxable income within the same Excel workbook.The Excel workbook contains pre-formatted tabs you'll need to complete to properly calculate taxable income.
Your tax senior has also asked you to prepare Form 1120, Schedule M-3 for Gnome once you have finished computing taxable income.
Tax Compliance and Provision Project - Parts I and II-1 Q . Search Sheet Home Insert Draw Page Layout Formulas Data Review View '+ Share Cut Calibri (Body) * 11 . A- A = = Wrap Text Number Percent 2 Normal Bad Good Neutral 1401 AutoSum Copy Fill Paste BI UT .&. A. BE Merge & Center $ ~ % " Conditional Format Calculation Check Cell Explanatory T... Input Linked Cell Insert Delete Format Sort & Format Formatting as Table Clear Find & Filter Select G30 + X V fx C D E F G H K L M N P Q R Oh Gnome You Didn't, Inc. Temporary Book/Tax Differences - Supporting Calculations Select from the provided list of options Manual input is required Allowance for Doubtful Accounts Organizational Costs Type of Book/Tax Expense Type of Book/Tax Acct. Number Account Name Beg. Balance End. Balance Schedule M Difference Acct. Number Account Name Amour Difference #N/A 0 #N/A 0 Allowable Tax Deduction #DIV/O! Schedule M #DIV/0! Prepaid Property Taxes Maximum Immediate Expense Type of Book/Tax Immediate Expense Phaseout Acct. Number Account Name Beg. Balance End. Balance Schedule M Difference Allowable Immediate Expense #N/A 0 Amortizable Expense Recovery Period (months) # of Months in 2018 Capital Loss 2018 Org Cost Amortization #DIV/O! Expense Type of Book/Tax Acct. Number Account Name Amount Difference #N/A 0 Allowable Tax Deduction Charitable Contributions Schedule M 0 Expense Type of Book/Tax Acct. Number Account Name Amount Difference #N/A 0 Allowable Tax Deduction #DIV/O! Stock Compensation Expense Schedule M #DIV/0! Expense Type of Book/Tax Acct. Number Account Name Amount Difference Tentative Taxable Income #DIV/O! *includes deduction for total charitable contributions #N/ 0 Add: Charitable Contributions 0 Allowable Tax Deduction Modified Taxable Income #DIV/O! Schedule M 0 Tax Deduction Limitation % Tax Deduction Limitation #DIV/O! Depreciation Useful Life Bonus Depr. Bonus Regular 2018 Tax Acct. Number Account Name Asset Cost (in months) Allowance % Depreciation Depreciation Depreciation #N/ 84 o 0 #N/A 60 #N/A 46 Tax Depreciation State Adjustments Book-to-tax Rec Perm Book-Tax Differences Temp Book-Tax Differences Financial Statements Trial Balance + Ready Q J - + 100%Tax Compliance and Provision Project - Parts | and II-1 Q . Search Sheet Home Insert Draw Page Layout Formulas Data Review View "+ Share ~ Cut Calibri (Body) * 11 . A- A- = = Wrap Text Number Percent 2 Normal Bad Good Neutral AutoSum Copy Fill AP. Q . Paste Format BI UT .&. A. Merge & Center $ % " 00 .0 Conditional Format Calculation Check Cell Explanatory T.. Input Linked Cell Insert Delete Format Sort & Formatting as Table Clear Find & Filter Select G30 4 X v fx B C D E F G H K M N 0 P Q R 29 Stock Compensation Expense Schedule M #DIV/UT Expense Type of Book/Tax Acct. Number Account Name Amount Difference Tentative Taxable Income #DIV/O! includes deduction for total charitable contributions #N/A 0 Add: Charitable Contributions Allowable Tax Deduction Modified Taxable Income #DIV/0! Schedule M 0 Tax Deduction Limitation Tax Deduction Limitation #DIV/O! Depreciation Useful Life Bonus Depr. Bonus Regular 2018 Tax Acct. Number Account Name Asset Cost (in months Allowance Depreciation Depreciation Depreciation #N/A 84 #N/A 60 #N/A 60 Tax Depreciation Acct. Number (Book Depreciation Expense) #N/A Type of Book/Tax Difference Schedule M Amortization Recovery Period 2018 Tax Acct. Number Account Name Asset Cost (in months) # of Months Amortization #N/A #DIV/O! #N/A 0 #DIV/0 #DIV/O! Tax Amortization #DIV/O! Acct. Number (Book Amortization Expense) #N/A Type of Book/Tax Difference Schedule M #DIV/0! State Adjustments Book-to-tax Rec Perm Book-Tax Differences Temp Book-Tax Differences Financial Statements Trial Balance + Ready + 100%3 Tax Compliance and Provision Project - Parts I and II-1 Q Search Sheet '+ Share Home Insert Draw Page Layout Formulas Data Review View Bad Neutral 14#1 _ AutoSum & Cut = = Wrap Text Number Percent 2 Normal Good Calibri (Body) * 11 . A- A Fill AP . Q. Copy Merge & Center $ % 2 00 $.0 Conditional Format Calculation Check Cell Explanatory T... Input Linked Cell Insert Delete Format Clear Sort & Find & Filter Select Paste Format B Formatting as Table + X V fx -13427 C D E F G H 1 J K L M N P Q R S T U V w X Y Z AA AB Oh Gnome You Didn't, Inc. 12/31/2018 Trial Balance Debit/(Credit) Format Account Jan. 1, 2018 Dec. 31, 2018 Number Account Name Balance Balance 100 Cash 632,673 Total Cash 632,673 105 Accounts Receivable 345,200 Per SOCF 632,673 110 Allowance for Doubtful Accounts (13,427) Variance 115 Interest Receivable 000'9 120 Prepaid Property Taxes 8,000 125 Long-term Investment - Municipal Bond 100,000 130 Furniture & Fixtures 45,000 135 Accumulated Depreciation - Furniture & Fixtures DO0'6) 140 Equipment - Gnome 130,000 14 Accumulated Depreciation - Equipment - Gnome (32,500) 150 Equipment - Duck 690,000 15 Accumulated Depreciation - Equipment - Duck (100,625) 160 Goodwill 657,000 20 16! Intangibles - Non-goodwill 378,000 170 Accumulated Amortization (94,827) Total Assets 2,741,494 200 Accounts Payable (11,000) Per Balance Sheet 2,741,494 220 Accrued Salaries and Wages Payable (000'OT) Variance 225 Accrued Payroll Taxes (765 230 Accrued Interest - Bank Loan (000'79) 1235 Accrued Charitable Contributions (20,500) 240 Federal Income Tax Payable (33,986) 245 State Income Tax Payable (34,182) 250 Long-term Note Payable - Bank Loan o o o o o o o o o o o o o o o o o o o o o o o o o o o (000'009'T) Total Liabilities (1,908,768) 255 Deferred Tax Liability (134,335) Per Balance Sheet (1,908,768) 300 Common Stock 2,000) Variance 310 Additional Paid-in Capital (398,000) 350 Retained Earnings 355 Dividends Paid 150,000 Total Equity (832,726) 360 AOCI - Nonqualified Stock Options (11,176) Per Balance Sheet (832,726) 400 Service Revenue - Gnome (000'868) Variance 410 Service Revenue - Duck (496,000) 420 Interest Income - Municipal Bond (000'9) 500 Supplies Expens 13,95 505 Rent Expense 36,000 $10 Property Tax Expense 7,365 515 Salaries and Wages Expense 520 Payroll Tax Expense 9,180 525 Stock Compensation Expense - NSOs 11,176 530 Bad Debt Expense 13,427 535 Charitable Contributions 20,500 540 Entertainment Expense 7.500 645 Meals Expense 4,200 1550 Tax Consulting Services 2,500 Temp Book-Tax Differences Financial Statements Trial Balance + 100% ReadyTax Compliance and Provision Project - Parts I and II-1 Q Search Sheet 9 '+ Share ~ Home Insert Draw Page Layout Formulas Data Review View _ AutoSum & Cut A- A Ed Wrap Text Number Percent 2 Normal Bad Good Neutral Fill Copy Calibri (Body) * 11 Explanatory T... Input Linked Cell Insert Delete Format Sort & Find & Paste $ ~ % " -00 Conditional Format Calculation Check Cell Clear Filter Select Format E E Merge & Center Formatting as Table DS + X V A D E G H 1 K L M N P Q R S T U v w X Y Z AA AB 3 220 Accrued Salaries and Wages Payable 4 225 Accrued Payroll Taxes (765) 230 (64,000) 235 Accrued Charitable Contributions Federal Income Tax Payable oooooooooooo (10,000) Variance Accrued Interest - Bank Loan (20,500) 240 33,986) 245 State Income Tax Payable (34,182) 250 Long-term Note Payable - Bank Loan (1,600,000) Total Liabilities (1,908,768) 255 Deferred Tax Liability (134,335 Per Balance Sheet (1,908,768) 300 Common Stock (000'Z Variance 310 Additional Paid-in Capital (398,000) 350 Retained Earnings D 355 Dividends Paid 150,000 Total Equity (832,726) 360 AOCI - Nonqualified Stock Options (11,176) Per Balance Sheet (832,726) 400 Service Revenue - Gnome (898,000) Variance 410 Service Revenue - Duck (496,000) 420 Interest Income - Municipal Bond (000'9) 39 50 Supplies Expense 13,955 40 505 Rent Expense 0DO'98 510 Property Tax Expense 7,365 2 515 Salaries and Wages Expense 120,000 3 520 Payroll Tax Expense 9,180 525 Stock Compensation Expense - NSOs 11,176 5 530 Bad Debt Expense 13,427 535 Charitable Contributions 20,500 47 540 Entertainment Expense 7,500 545 Meals Expense 4,200 550 Tax Consulting Services 2,500 555 Organizational Expense 51,800 560 Interest Expense - Bank Loan 64,000 565 Investment Expense- Municipal Bond 2,392 570 Depreciation Expense 142,125 575 Amortization Expense 94,827 580 Capital Loss on Sale of Investment 25,000 6 585 Federal Current Tax Expense 33.986 586 Federal Deferred Tax Expense 122,646 8 590 State Current Tax Expense 34.182 9 591 State Deferred Tax Expense 11,689 0 Check - s/b 0 (571,550) Net Loss/(Income) (571,550) Per Income Statement Variance Temp Book-Tax Differences Financial Statements Trial Balance + - + 100% ReadyTax Compliance and Provision Project - Parts | and II-1 Q . Search Sheet Home Insert Draw Page Layout Formulas Data Review View "+ Share Cut Calibri (Body) * 11 . A- A = = = Wrap Text Custom 60% - Accent3 60% - Accent4 Accent4 Accent5 Accent6 AutoSum AP. Q Copy Fill Paste B I U. .&. A.= = Merge & Center $ % 2 08 0 Conditional Format ccent2 Accent3 Currency Currency [0] Percent Insert Delete Format Clear Sort & Find & Format Formatting as Table Filter Select 120 4 X V fx A C D E F G H J K L M N 0 P Q R S T U V w X Y Z Oh Gnome You Didn't, Inc. 2018 Taxable Income Calculation **Accuracy Checkpoint Below*** Book Net Income/(Loss) 571,550 Non-Deductible Tax Expense 168,321 Permanent Book/Tax Differences Interest Income - Municipal Bond Investment Expense - Municipal Bond Entertainment Expense Meals Expense Total Permanent Differences Temporary Book/Tax Differences Depreciation Prepaid Property Taxes Capital Loss Charitable Contributions #DIV/0! Amortization #DIV/O! Organizational Costs #DIV/O! Allowance for Doubtful Accounts 0 Stock Compensation Expense Total Temporary Differences #DIV/0! 2018 Taxable Income #DIV/O! Accuracy Checkpoint - Correct Answer 161,836 Variance (should be within +/- 1.0) #DIV/0! State Adjustments Book-to-tax Rec Perm Book-Tax Differences Temp Book-Tax Differences Financial Statements Trial Balance + Ready 100%.. . Tax Compliance and Provision Project - Parts | and II-1 Q Search Sheet Home Insert Draw Page Layout Formulas Data Review View "+ Share ~ Cut Calibri (Body) * 11 . A- A Wrap Text General Percent 2 Normal Bad Good Neutral AutoSum Copy Fill AP. Q. Paste Format BI UT -. A. Merge & Center $ % 2 08 08 Conditional Format Calculation Check Cell Explanatory T... Input Linked Cell Insert Delete Format Clear Sort & Find & Formatting as Table Filter Select F31 4 X V J C D E F G H K L M N 0 P Q R S T U V Oh Gnome You Didn't, Inc. Permanent Book/Tax Differences - Supporting Calculations Select from the provided list of options Manual input is required Disallowed % Type of Book/Tax Type of Perm Adjustment Reason for Perm Adjustment Acct. Number Account Name Amount for Tax Schedule M Difference Interest Income - Municipal Bond #N/A Investment Expense - Municipal Bond #N/A Entertainment Expense #N/A Meals Expense #N/A Non-deductible Tax Expense Acct. Number Account Name Amount Federal Current Tax Expense 585 Federal Current Tax Expense 33,986 Federal Deferred Tax Expense 586 Federal Deferred Tax Expense 122,646 State Deferred Tax Expense 591 State Deferred Tax Expense 11,689 Disallowed Income Tax Expense 168,321 State Adjustments Book-to-tax Rec Perm Book-Tax Differences Temp Book-Tax Differences Financial Statements Trial Balance + Ready - + 100%Tax Compliance and Provision Project - Parts I and II-1 Q . Search Sheet Home Insert Draw Page Layout Formulas Data Review View + Share & Cut Calibri (Body) * 11 . A- A = = = Wrap Text Number Percent 2 Normal Bad Good Neutral 1401 _ AutoSum AP. Q. Copy Fill Paste Format B IU. . &. A. = = =38 Merge & Center $ ~ % 2 08 0 Conditional Format Calculation Check Cell Explanatory T.. Input Linked Cell Insert Delete Format Sort & Formatting as Table Clear Find & Filter Select C13 4 x v fx ='Trial Balance'lD53 C D E F G H K M N P Q R Oh Gnome You Didn't, Inc. Oh Gnome You Didn't, Inc. Oh Gnome You Didn't, Inc. Oh Gnome You Didn't, Inc. Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows For the Year Ended 12/31/2018 For the Year Ended 12/31/2018 As of 12/31/2018 For the Year Ended 12/31/2018 Assets Cash from Operating Activities Service Revenue 1,394,000 Balance at Jan. 1, 2018 Cash 632,673 Accounts Receivable, net 331,773 Cash received from customers 1,048,800 Payroll Expense 140,356 Net Income 571,550 Other Current Assets 14,000 Cash paid in the normal course of operations (189,327) Rent Expense 36,000 Dividends Paid (000'OST) Total Current Assets 978,446 Cash paid for organizational costs (51,800) Supplies Expense 13,955 Net Cash Provided by Operating Activities 807,673 Depreciation Expense 142,125 Balance at Dec. 31, 2018 421,550 Bond Investment 100,000 Amortization Expense 94,827 Organizational Expense 51,800 Furniture & Fixtures, net 36,000 Cash from Investing Activities Charitable Contributions 20,500 Equipment, net 586,875 Other SG&A Expense 37,384 Total PP&E, net 722,875 Cash paid to acquire PP&E (ooo'S98) Total Expenses 536,947 Cash paid to acquire capital investments (200,000) Goodwill 657,000 ash received from the sale of capital investments 75,000 Income from Operations 857,053 Other Intangibles, net 283,173 Cash paid to acquire intangible assets (1,035,000) Total Intangibles, net 940,173 Net Cash Used in Investing Activities (2,025,000) Interest Income 6,000 Total Non-Operating Income/Gain 6,000 Total Assets 2,741,494 Cash from Financing Activities Interest Expense 000'19 Liabilities Loss on Sale of Investment 25,000 Accounts Payable 11,000 Cash received from stockholders 000'00 Total Non-Operating Expense/Loss 89,000 Salaries & Wages Payable 10,000 Cash received from bank loan proceeds 000'009'T nterest Payable 000'19 Cash paid for dividend distributions (150,000) Income before Income Taxes 774,053 Income Tax Payable 68,168 Net Cash Provided by Financing Activities 1,850,000 Income Tax Expense 202,503 Other Current Liabilities 21,265 Net Income/(Loss) 571,550 Total Current Liabilities 174,433 Net increase in cash for the year ended Dec. 31, 2018 632,673 Cash Balance at January 1, 2018 Note Payable 1,600,000 Cash Balance at December 31, 2018 632,673 Deferred Tax Liability 134,335 Total Liabilities 1,908,768 Stockholders' Equity Common Stock 2,000 Additional Paid-in Capital 398,000 Retained Earnings 421,550 AOCI - Stock Options 11,176 Total Stockholders' Equity 832,726 Total Liabilities & Stockholders' Equity 2,741,494 Temp Book-Tax Differences Financial Statements Trial Balance + eady 100%
