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Acme Corporation, a calendar year taxpayer, prepares its financial statements. They use the accrual method for both book and tax purposes. The company provided information
Acme Corporation, a calendar year taxpayer, prepares its financial statements. They use the accrual method for both book and tax purposes. The company provided information relating to its 2021 year-end on the bottom of the Book-to-Tax Worksheet sheet.
1. Confirm the book amount for 2021
2. Book to tax differences - which is favorable or unfavorable
3. Provide the taxable income
4. permanent or temporary
Evaluate for potential book-to-tax differences | Book |
Amount | |
Life insurance proceeds due to CEO’s death | $500,000 |
Revenue from sales (for both book and tax) | 11,000,000 |
Premiums paid on key-person life insurance | 28,000 |
Dividend Income (Bella Corporation, 50% ownership interest) | 300,000 |
Charitable contributions | 700,000 |
(Tax deduction is limited to ____% of taxable income before the charitable deduction). | |
Cost of goods sold (for both book and tax) | 7,500,000 |
Interest income earned on tax-exempt bonds | 75,000 |
Interest expense paid on loan to purchase tax-exempt bonds | 40,000 |
Rental income received and earned in 2021 | 50,000 |
Rental income received in 2020 but earned in 2021 | 30,000 |
Rental income received in 2021 but not earned by earn-end | 90,000 |
Depreciation (Tax depreciation $95,000) | 70,000 |
Lobbying fees paid to energy industry | 85,000 |
Business meal (non-restaurant meals) | 35,000 |
Entertainment expense | 20,000 |
October - December accrued bonus (book) payable March 31 | 250,000 |
Increase to allowance for doubtful accounts (Bad debt write-offs $180,000) | 220,000 |
Net capital loss | 195,000 |
Warranty expense accrual (no warranty expense payouts for the year) | 60,000 |
Compensation (no single officer was paid over $1,000,000) | 1,500,000 |
Provision for income taxes (per books) -not deductible for taxable income | - |
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