In January 2015, Pelican, Inc., established an allowance for uncollectible accounts (bad debt reserve) of $70,000 on its books and increased the allow-zzz ance by $120,000 during the year. As a result of a client’s bankruptcy, Pelican, Inc., decreased the allowance by $60,000 in November 2015. Pelican, Inc., deducted the $190,000 of increases to the allowance on its 2015 income statement but was not allowed to deduct that amount on its tax return. On its 2015 tax return, the corporation was allowed to deduct the $60,000 actual loss sustained because of its client’s bankruptcy. On its financial statements, Pelican, Inc., treated the $190,000 increase in the bad debt reserve as an expense that gave rise to a temporary difference. On its 2015 tax return, Pelican, Inc., took a $60,000 deduction for bad debt expense. How is this information reported on Schedule M–3?
Answer to relevant QuestionsIn January of the current year, Don and Steve each invested $100,000 cash to form a corporation to conduct business as a retail golf equipment store. On January 5, they paid Bill, an attorney, to draft the corporate charter, ...A new client, John Dobson, recently formed John’s Premium Steakhouse, Inc., to operate a new restaurant. The restaurant will be a first-time business venture for John, who recently retired after 30 years of military ...Janice Boyer, the controller of one of your clients, calls you to ask what impact current E & P has on ACE. She wants to know if ACE is the same as current E & P. Prepare a tax file memo indicating what you told Ms. Boyer. Red Oak, Inc., manufactures and sells children toys. It also sells toys purchased from other manufacturers. During the current year, Red Oak had a profit of $130,000 (all of which is QPAI) from the sale of its own ...Vtech, a calendar year C corporation, has accumulated E & P of $2,900,000 as of January 1, 2016. Its current E & P for 2016 is $845,000, and it has reasonable business needs of $3,600,000. Vtech’s taxable income (as ...
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