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Reconcile book income to taxable income on worksheet $($below$).$

Notes:

$1.$ SMP owns $10\%$ of the outstanding S Corp. $($S$)$ stock. S Corp. reported $$2,000,000$ of income for the year. SMP accounted for its investment in S Corp under the equity method and it recorded its pro rata share of S Corps$$s earnings for the year. HC also distributed a $$100,000$ dividend to SMP$.$

$2.$ Of the $$20,000$ interest income, $$5,000$ was from Ford Motor, $$7,000$ was from a Toyota, $$6,000$ was from a Town of Smith Field municipal bond, and the remaining $$2,000$ was from an investment in a CD $($certificate of deposit$).$

$3.$ Life insurance proceeds from death of the CFO.

$4.$ This includes total officer compensation of $$3,500,000.$ The CEO was paid $$1,250,000$ for salary in $2018($no one officer received more than $$1,000,000$ compensation$).$

$5.$ $$2,000$ is the portion of interest paid on a loan taken out to obtain a tax$-$exempt municipal bond from the City of Smith Field.

$6.$ SMP actually wrote off $$48,000$ of its accounts receivable as uncollectible.

$7.$ Tax depreciation was $$700,000.$

$8.$ In the current year, SMP made $$23,500$ in actual payments on warranties it provided to customers.

$9.$ SMP made $$750,000$ of cash contributions to qualified charities during the year.

$10.$ On January $1$ of this year SMP acquired the assets of another business. In the process it acquired $$200,000$ of goodwill. At the end of the year, SMP wrote off $$10,000$ of the goodwill as impaired.

$11.$ SMP expensed all of its organizational expenditures for book purposes. It expensed the maximum amount of organizational expenditures allowed for tax purposes.

$12.$ The other expenses do not contain any items with book$-$tax differences.

$13.$ SMP received rental income payments in $2018$ that relates to $2019.$ They have not earned the amount as of year$-$end and was not recorded in the books. The total amount received was $$21,500.$

Book to Tax Worksheet:

SMP corp.

Book to Tax

Income statement Book Adjustments Taxable

For current year Income $($Dr$.)$ Cr$.$ Income

Revenue from sales $$47,000,000$

Cost of Goods Sold $(34,000,000)$

Gross profit $xxxxxxxxx

Other income:

Income from investment in S Corp stock $200,000$

Interest income $20,000$

Capital gains $($losses$)(4,000)$

Life insurance proceeds $315,000$

Miscellaneous income $50,000$

Gross Income

Expenses:

Compensation $(7,500,000)$

Interest expense $(5,000)$

Advertising $(1,350,000)$

Repairs and Maintenance $(75,000)$

Rent $(22,000)$

Bad Debt expense $(51,000)$

Depreciation $(1,000,000)$

Warranty expenses $(90,000)$

Charitable donations $(750,000)$

Life insurance premiums

Meals $(45,000)$

$(12,500)$

Goodwill impairment $(10,000)$

Organizational expenditures $(59,000)$

Other expenses $(140,000)$

Total expenses $($$$11,390,000)$

Income before taxes $XXXXXXX

Provision for income taxes $(520,000)$

Net Income after taxes $XXXXXX

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