Timpanogos Inc. is an accrual-method calendar-year corporation. For 2018, it reported financial statement income after taxes of
Question:
Timpanogos Inc. is an accrual-method calendar-year corporation. For 2018, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2018 activities:
Life insurance proceeds as a result of CEO’s death.......................................$200,000
Revenue from sales (for book and tax purposes)....................................... 2,000,000
Premiums paid on the key-person life insurance policies. The
policies have no cash surrender value........................................ 21,000
Charitable contributions.....................................................................................180,000
Cost of goods sold for book purposes and tax................................................300,000
Interest income on tax-exempt municipal bonds issued in 2017....................40,000
Interest paid on loan obtained to purchase tax-exempt municipal bonds.....45,000
Rental income payments received and earned in 2018....................................15,000
Rental income payments received in 2017 but earned in 2018.......................10,000
Rental income payments received in 2018 but not earned by year end.........30,000
Tax depreciation......................................................................................................55,000
Book Depreciation...................................................................................................25,000
Net capital loss.........................................................................................................42,000
Federal income tax expense for books in 2018.................................................500,000
Required:
a. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income.
b. Identify each book-tax difference as either permanent or temporary.
c. Complete Schedule M-1 for Timpanogos.
d. Compute Timpanogos, Inc.’s tax liability for 2018.
Step by Step Answer:
Taxation Of Individuals And Business Entities 2019 Edition
ISBN: 9781259918391
10th Edition
Authors: Brian C. Spilker, Benjamin C. Ayers, John Robinson, Edmund Outslay, Ronald G. Worsham, John A. Barrick, Connie Weaver