LO.10 Albatross Corporation, a calendar year and accrual method taxpayer, provides the following information and asks you to prepare Schedule M–1 for 2010:

Net income per books (after-tax) $257,950 Federal income tax per books 41,750 Tax-exempt interest income 8,000 Life insurance proceeds received as a result of death of corporate president 150,000 Nondeductible penalties 2,000 Interest on loan to purchase tax-exempt bonds 1,500 Excess of capital losses over capital gains 4,000 Premiums paid on life insurance policy on life of Albatross’s president 7,800 Domestic production activities deduction 4,800 Excess of tax depreciation over book depreciation 2,200