For 2017, Permtemp reported the following book income statementand balance sheet, excluding the federal...

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Accounting

For 2017, Permtemp reported the following book income statementand balance sheet, excluding the federal income tax expenses,deferred tax assets, and deferred tax liabilities:
Sales $33,000,000
Cost of Goods Sold (22,000,000)
____
GrossProfit                                                     $11,000,000
Dividend Income 55,000
Tax-exempt Interest Income 15,000

Total Income $ 11,070,000
Expenses $  800,000
Bad Debts 625,000
Charitable Contr.    40,000
Interest 455,000
Meals & Entertainment 60,000
Other 4,675,000
_
Total Expenses (6,655,000)
   _
Net loss before federal income taxes $4,415,000
============
Cash $2,125,000
Accounts receivable     $3,300,000
Allowance fordoubtful     (450,000)                  2,850,000
   _
Inventory 6,000,000
Fixed Assets $10,000,000
Acc. depr.(1,600,000)                8,400,000
Investment in Corporate Stock 1,000,000
Investment in tax-exempt bonds   50,000
   _
Total Assets $20,425,000
===========
Accounts Payable $ 2,120,000
Long-term debt 8,500,000
Common Stock 6,000,000
Retained Earnings 3,805,000
   ____
Total Liabilities and equity $20,425,000
===========
Additional information for 2017:
Because of limitations, $30,000 of the meals and entertainmentexpenses will be disallowed for tax purposes.
Depreciation for tax purposes is $2.45 million under MACRS
Bad debt expense for tax purposes is $425,000 under the directwriteoff method.
Ignore the U.S. production activities deduction.
The corporate tax rate in 2017 was 34%.
At the end of 2017, Congress reduced the corporate tax rate to21% effective for 2018.
Required for 2017:
Prepare page 1 of the 2017 Form 1120, computing thecorporation’s taxable income and tax liability.
Determine the corporation’s deferred tax asset and deferred taxliability situation, and then complete the income statement andbalance sheet to reflect proper GAAP accounting ASC 740. Because ofthe enacted tax rate change, deferred assets and liabilities in theend of 2017 will need to be value at 21%. Use the balance sheetinformation to prepare Schedule L of the 2017 Form 1120.
Prepare the 2017 Schedule M-3 for Form 1120.
Prepare a schedule that reconciles the corporation’s effectivetax rate to the statutory 34% tax rate.  This schedulewill need a line to reflect the change in the future tax rate.

Answer & Explanation Solved by verified expert

4.0 Ratings (708 Votes)

Sales	33000000
Cost of Goods Sold	22000000
Gross Profit	11000000
Dividend Income	55000
Tax-Exempt Interest Income	15000
Total Income	11070000

Expenses	800000
Bad Debts	625000
Charitable Contr.	40000
Interest	455000
Meals & Entertainment	60000
Others	4675000
Total Expenses	6655000
Net Incmone before federal income taxes	4415000

Cash	2125000
Accounts Receivable	3300000
Less: Allowance for doubtful	-450000
Inventory	6000000
Fixed Assets	10000000
Less: Depreciation	-1600000
Investment in Corporate Stock	1000000
Investment in tax-exempt bonds	50000

Total Assets	20425000

Accounts Payable	2120000
Long-term debt	8500000
Common Stock	6000000
Retained Earnings	3805000

Total Liability	20425000


Particulars	Year 2017
Profit before tax (A)	4,415,000
Depreciation as per Companies Act (B)	2,450,000
Accounting income (A-B)	1,965,000
Depreciation as per Income tax Act ( C )	1,600,000
Taxable income (A-C)	2,815,000
Timing difference(Meals & Entertainment & Bad Debts) (D)	45,500
Current Tax @ 34%	957,100
Deferred Tax (D * 30%)	13,650
Total Tax Expense	970,750
Profit After Tax	994,250

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In: AccountingFor 2017, Permtemp reported the following book income statementand balance sheet, excluding the federal income...For 2017, Permtemp reported the following book income statementand balance sheet, excluding the federal income tax expenses,deferred tax assets, and deferred tax liabilities:Sales $33,000,000Cost of Goods Sold (22,000,000)____________GrossProfit $11,000,000Dividend Income 55,000Tax-exempt Interest Income 15,000 ____________Total Income $ 11,070,000Expenses $ 800,000Bad Debts 625,000Charitable Contr. 40,000Interest 455,000Meals & Entertainment 60,000Other 4,675,000_______________Total Expenses (6,655,000) ___________Net loss before federal income taxes $4,415,000============Cash $2,125,000Accounts receivable $3,300,000Allowance fordoubtful (450,000) 2,850,000 _________Inventory 6,000,000Fixed Assets $10,000,000Acc. depr.(1,600,000) 8,400,000Investment in Corporate Stock 1,000,000Investment in tax-exempt bonds 50,000 ___________Total Assets $20,425,000===========Accounts Payable $ 2,120,000Long-term debt 8,500,000Common Stock 6,000,000Retained Earnings 3,805,000 __________Total Liabilities and equity $20,425,000===========Additional information for 2017:Because of limitations, $30,000 of the meals and entertainmentexpenses will be disallowed for tax purposes.Depreciation for tax purposes is $2.45 million under MACRSBad debt expense for tax purposes is $425,000 under the directwriteoff method.Ignore the U.S. production activities deduction.The corporate tax rate in 2017 was 34%.At the end of 2017, Congress reduced the corporate tax rate to21% effective for 2018.Required for 2017:Prepare page 1 of the 2017 Form 1120, computing thecorporation’s taxable income and tax liability.Determine the corporation’s deferred tax asset and deferred taxliability situation, and then complete the income statement andbalance sheet to reflect proper GAAP accounting ASC 740. Because ofthe enacted tax rate change, deferred assets and liabilities in theend of 2017 will need to be value at 21%. Use the balance sheetinformation to prepare Schedule L of the 2017 Form 1120.Prepare the 2017 Schedule M-3 for Form 1120.Prepare a schedule that reconciles the corporation’s effectivetax rate to the statutory 34% tax rate. This schedulewill need a line to reflect the change in the future tax rate.