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	-

Answer rating: 100% (QA)

Solution Acme Corporation a calendar year taxpayer prepares its financial statements They use the ac... View the full answer