Based on the information below, prepare a reconciliation of ABC Companys accrual basis income to their federal taxable income. ABC Files its income tax return on the accrual basis of accounting with an accounting period that follows the calendar year. The Company, which provides environmental clean-up services, has been in business for over 50 years. The Company is a C-Corporation and all of the Companys outstanding stock is owned by one individual. Based upon your discussion with the Companys Accounting Manager, your review of the Companys Dec 31, 2021 trial balance, and your review of the prior period tax return you have gathered the following information. 1. Included in the Companys expenses is a 150,000 fine paid, during 2021, to the OSHA in connection with an unfortunate workplace fatality that occurred during calendar year 2019. The matter was settled during 2021. 2. The Companys tax account includes: The Companys payment of 2021 federal estimated tax payments of 60K; the Companys 2021 Virginia estimated tax payments of 25K; and real estate and personal property taxes totaling 8,500. All of the Companys business is conducted in Virginia and the Company is not required file in any other state. 3. The Companys book depreciation is computed on a straight-line basis and for the year ended 2021 totaled 17K. As of Jan 1, 2021, all of the Companys assets were fully depreciated and during 2021 the Company acquired, on Jan 1, 2021, a piece of equipment for a total cost of 170K. For book purposes it is being depreciated over a 10 year useful life with no salvage value and for tax purposes it is being depreciated over 10 years under the DDB method, with no salvage value. Calculate a full years tax depreciation for 2021. Virginia will accept the DDB method of depreciation. 4. The Company accounts for bad debts under the allowance method. During 2021 the allowance was increased 13,500. There were no recoveries or write offs during 2021. The Accounting Manager has advised that the Company has recently (during calendar year 2021) been notified that a customer has filed for bankruptcy. As of Dec 31, 2021, this customer owed the Company 7,500. There is little hope that this amount will be collected. 5. The Company does business with a number of related entities, including a sister company owned 100% by the sole owner of ABC. The sister company, DMJ Company, is a calendar year C Corporation that reports its income on the cash method of accounting. As of Dec 31, 2021, ABC Company has a payable to DMJ Company in the amount of 72K. This payable was paid in full on March 15, 2022.

	DEBITS	CREDITS			DEBITS	CREDITS
CASH	475,000.00			CASH	1,085,000.00
AR	1,750,000.00			AR	1,825,000.00
ALLOW FOR DOUBTFUL ACCTS		22,000.00		ALLOW FOR DOUBTFUL ACCTS		35,500.00
EQUIP	1,225,000.00			EQUIP	1,395,000.00
ACCUM'D DEPRECIATION		1,225,000.00		ACCUM'D DEPRECIATION		1,242,000.00
AP		275,000.00		AP		289,000.00
UNPAID WAGES		15,000.00		UNPAID WAGES		4,500.00
NOTE PAYABLE BANK		20,000.00		NOTE PAYABLE BANK		15,000.00
COMMON STOCK		10,000.00		COMMON STOCK		10,000.00
ADD'L PAID IN CAPITAL		5,000.00		ADD'L PAID IN CAPITAL		5,000.00
RETAINED EARNINGS		404,700.00		RETAINED EARNINGS		1,878,000.00
SALES		7,500,000.00		SALES		8,250,000.00
BAD DEBT EXPENSE	3,000.00			BAD DEBT EXPENSE	13,500.00
FINES & PENALTIES	200			FINES & PENALTIES	150,000.00
TAXES	23,500.00			TAXES	93,500.00
DEPRECIATION				DEPRECIATION	17,000.00
OTHER EXP	6,000,000.00			OTHER EXP	7,150,000.00
	9,476,700.00	9,476,700.00			11,729,000.00	11,729,000.00
Required:
1. Based on the preceding information, reconcile the Companys 2021 accrual basis earnings to its 2021 federal taxable income and compute the Companys 2021 Federal and State taxes.
2. Based upon your computation of the Companys 2021 Federal and State taxes, prepare the necessary journal entry to record the Companys current income tax expense for 2021. Note: Ignore the impact of deferred income taxes.