Permtemp Corporation formed in 2015 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

Additional information for 2015:

? The investment in corporate stock is comprised of less-than-20%-owned corporations.

? Depreciation for tax purposes is $1.4 million under MACRS.

? Bad debt expense for tax purposes is $150,000 under the direct writeoff method.

? Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary.

? Qualified production activities income is zero.

Required for 2015:

a. Prepare page 1 of the 2015 Form 1120, computing the corporation?s NOL.

b. Determine the corporation?s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2015 Form 1120.

c. Prepare the 2015 Schedule M-3 for Form 1120.

d. Prepare a schedule that reconciles the corporation?s effective tax rate to the statutory 34% tax rate.

For 2015 forms, go to forms and publications, prior year, at the IRS website, www.irs.gov. 

For 2016, Permtemp reported the following book income statement and balance sheet,  excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

Additional information for 2016:

? Depreciation for tax purposes is $2.45 million under MACRS.

? Bad debt expense for tax purposes is $425,000 under the direct writeoff method.

? Qualified production activities income is $3 million.

Required for 2016:

a. Prepare page 1 of the 2016 Form 1120, computing the corporation?s taxable income and tax liability.

b. Determine the corporation?s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Use the balance sheet information to prepare Schedule L of the 2016 Form 1120.

c. Prepare the 2016 Schedule M-3 for Form 1120.

d. Prepare a schedule that reconciles the corporation?s effective tax rate to the statutory 34% tax rate.

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Sales Cost of goods sold Gross profit Dividend income Tax-exempt interest income $20,000,000 (15,000,000) $ 5,000,000 50,000 15,000 $ 5,065,000 Total income Expenses: Depreciation Bad debts Charitable contributions $ 800,000 400,000 100,000 475,000 45,000 3,855,000 Interest Meals and entertainment Other Total expenses Net loss before federal income taxes (5,675,000) $ (610,000) $ 500,000 Cash Accounts receivable Allowance for doubtful accounts $ 2,000,000 (250,000) 1,750,000 4,000,000 Inventory Fixed assets Accumulated depreciation Investment in corporate stock Investment in tax-exempt bonds $10,000,000 (800,000) 9,200,000 1,000,000 50,000 $16,500,000 Total assets Accounts payable Long-term debt Common stock Retained earnings Total liabilities and equity $2,610,000 8,500,000 6,000,000 (610,000) $16,500,000