X is a calendar year, regular corporation with the following information reflected on its profit and loss statement, with the statement audited by your firm. Your manager has given you the statement and asked you to prepare a workpaper computing taxable income and to show all book/tax differences used to compute that number.

P&L
Revenue	$1,000,000
Cost of Revenue	725,000
Gross Margin	275,000
Operating Expenses
Wages	120,000
Payroll taxes	90,000
Bad debt expense	2,000
Officer life insurance	600
Repairs & maintenance	5,000
Depreciation	10,000
Office expense	5,010
Uniforms	600
Rent	12,000
Travel	1,000
Equipment	750
Utilities	9,000
Meals	600
Total Operating Expenses	256,560
Other Income (Expense)
Dividends from 60% owned company	7,000
Loss upon asset disposal-book	(500)
Municipal interest income	350
Total Other Income (Expense)	6,850
Net Book Income	$25,290

Special notes:

• Net operating loss carryforward of $10,000
• Tax depreciation is $15,000
• Bad debts written off of $1200
• Tax basis of asset disposed of was $500 greater than book asset basis.

Answer rating: 100% (QA)

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