A corporation prepares its financial statements. They use the accrual-method for both book and tax purposes. The
Question:
A corporation prepares its financial statements. They use the accrual-method for both book and tax purposes. The company provided the following information relating to its 2021 year-end:
Book-Tax Differences | Book Amount | Permanent/ Temporary | Favorable/ Unfavorable |
Life insurance proceeds due to CEO’s death | $500,000 | ||
Revenue from sales (for both book and tax) | 3,000,000 | ||
Premiums paid on key-person life insurance | 28,000 | ||
*Charitable contributions (Tax deduction is limited to 10% of taxable income before the charitable deduction). | 750,000 | ||
Cost of goods sold (for both book and tax) | 1,500,000 | ||
Interest income earned on tax-exempt bonds | 80,000 | ||
Interest expense paid on loan to purchase tax-exempt bonds | 65,000 | ||
Rental income received and earned in 2021 | 35,000 | ||
Rental income received in 2020 but earned in 2021 | 40,000 | ||
Rental income received in 2021 but not earned by earn-end | 70,000 | ||
Depreciation (Tax depreciation $95,000) | 70,000 | ||
Lobbying fees paid to energy industry | 85,000 | ||
Business meal (restaurant) $30,000 (subject to CAA). entertainment $22,000 | 52,000 | ||
April – June accrued bonus (book) payable October 1 | 150,000 | ||
Increase to allowance for D/A (Bad debt write-offs $158,000) | $170,000 | ||
Net capital loss | 182,000 | ||
Federal income tax expense- Y/E, 2021 >>>>>calculate |
Complete the table above. Identify each book-tax difference as either permanent or temporary and either favorable or unfavorable. If no difference, please indicate N/A in both columns.
Expert Answer:
The detailed answer for the above question is provided below BookTax Differences Book Amount Permanent Temporary Favorable Unfavorable Life insurance proceeds due to CEOs death 500000 Permanent Favora... View the full answer
