Discussion Question $11-8($LO$.6)$

Using the categories in the following legend, classify each transaction as a plus $(+)$ or minus $()$ on Schedule M$-2$ of Form $1120-$S$.$ An answer might look like one of these: $"+$ AAA" or $"$ OAA."

Legend

AAA $=$ Accumulated adjustments account

OAA $=$ Other adjustments account

NA $=$ No direct effect on Schedule M$-2$

a$.$ Receipt of tax$-$exempt interest income

b$.$ Administrative expenses $($such as unreasonable compensation$)$

c$.$ Depreciation recapture income

d$.$ Nontaxable life insurance proceeds

e$.$ Expenses related to tax$-$exempt securities

f$.$ Charitable contributions

g$.$ Business gifts in excess of $$25$

h$.$ Nondeductible fines and penalties