58. XYZ is a calendar-year corporation that began business on January 1, 2018. For 2019, it reported the following information in its currentyear audited income statement. Notes with important tax information are provided below.

Required:
Identify the book-to-tax adjustments for XYZ.

a. Reconcile book income to taxable income and identify each book–tax difference as temporary or permanent.

b. Compute XYZ’s income tax liability.

c. Complete XYZ’s Schedule M-1.

d. Complete XYZ’s Form 1120, page 1 (use the most current form available). Ignore estimated tax penalties when completing this form.

e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties (see estimated tax information below).
XYZ Corp.
Income Statement for Current Year Book Income Book to Tax Adjustments (Dr.) Cr.
Taxable Income Revenue from sales $ 40,000,000 Cost of goods sold (27,000,000)
Gross profit $ 13,000,000 Other income:
Income from investment in corporate stock 300,0001 Interest income 20,0002 Capital gains (losses) (4,000)
Gain or loss from disposition of fixed assets 3,0003 Miscellaneous income 50,000 Gross income $ 13,369,000 Expenses:
Compensation (7,500,000)4 Stock option compensation (200,000)5 Advertising (1,350,000)
Repairs and maintenance (75,000)
Rent (22,000)
Bad debt expense (41,000)6 Depreciation (1,400,000)7 XYZ Corp.
Income Statement for Current Year Book Income Book to Tax Adjustments (Dr.) Cr.
Taxable Income Warranty expenses (70,000)8 Charitable donations (500,000)9 Meals (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 (720,000)13 Net income after taxes $ 1,259,000