Question

Prepare a Schedule M-1, page 5, Form 1120, reconciling Cramer’s book and taxable income.

Cramer Corporation, a calendar year, accrual basis corporation, reported $1.05 million of net income after tax on its 2018 financial statements prepared in accordance with GAAP. The corporation's books and records reveal the following information: • Cramer's federal income tax expense per books was $201,000. • Cramer's book income included $11,000 of dividends received from a domestic corporation in which Cramer owns a 25 percent stock interest, and $4,500 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest. • Cramer recognized $11,000 of capital losses this year and no capital gains. • Cramer recorded $8,600 of book expense for meals and $10,500 of book expense for entertainment costs. Cramer's depreciation expense for book purposes totaled $401,000. MACRS depreciation was $475,000.

Answer 1

Income recorded on books this year not included on this return Net income (loss) as per books Federal income tax per books Excess of capital losses over capital gains Income subject to tax not recorded on books this year 10,50,000 7 1 11000 11,000 Tax-exempt interest 2,01,000 2 11,000 3 4 Deductions on this return not charged against book income this year 8 Expenses recorded on books this year not deducted on this return 5 4,75,000 a. Depreciation 4,01,000 a.Depreciation b. Charitable contributions b.Charitable contributions 4,75,000 C. Others 19,100 c. Travel and entertainment 4,20,100 d.Others 4,86,000 Add line 7 and 8 10 Income 14,70,100 Add lines 1 through 5 6