Question

I have everything except i dont know what to do with the Depreciation for 2000 (where do i list it). Subtracting it leaves me with $138,000 and it should be $140,000.

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Please refer to the multiple choice question pasted on page 2. To understand corporate tax returns, you must have a good understanding of financial income statements. So please prepare an income statement based on the facts provided. I provide a template, but you can use your own. I plan to follow up with tax returns.

Tip: once you have prepared your income statement, check it to make sure that the totals compute.

You can use the template provided, or you can use your own. In either case, you are responsible for an aesthetic presentation.

Sales Revenue
Cost of Goods Sold	0	Assume zero
Gross Profit
Operating Expenses
Depreciation Expense		Assume $2,000
Operating Income:
Other revenue (loss)
Net capital Loss
Interest Revenue
Income Before Taxes
Income Tax Expense

[27] For the current year, accrual-basis Corp. A's books and records reflectod the following: $104,000 35,000 4,000 5,000 Net income per books Accrued federal income tax Net capital loss Tax-exempt interest Book depreciation in excess of allowable tax depreciation 2,000 Based on the above tacts, what is the amount of A's taxable income? A. $69,000 B. $70,000 C. $140,000 D. $150,000 The correct answer is C. A. Federal income tax is added to, not subtracted from, book net income. Also, the net capital loss and excess book depreciation must be added back, and tax-exempt interest income must be subtracted. B. Federal income taxes are not subtracted; they are added back to book net income. C. Federal income tax, excess capital losses, and book depreciation in excess of tax depreciation are not deductible. These amounts must be added back to book income. Tax- exempt interest is not taxable and must be subtracted from book income. These adjustments are done on Schedule M-1 of the corporation tax retum. Net income per books Add back: $104,000 Federal income tax 35,000 4,000 2,000 Net capital loss Excess book depreciation $145,000 (5,000) $140,000 Subtract: Tax-exempt interest Taxable income D. The tax-exompt interest is not added back; it is subtracted from book net income.

Answer 1

Net income as per books	104,000.00
Federal Income tax	35,000.00
Net capital loss	4,000.00
Excess Book Deprecaition	2,000.00
	145,000.00
tax exempt interest	-      5,000.00
Taxable income	140,000.00

Excess book Depreciation will be added back to the net income. As deduction for depreciation will be given as per the Tax act not as per books