PLEASE HELP ME ANSWER THE BLANK SAID \"SELECTED ANSWER INCORRECT\"! THANK YOU! T
ID: 2329775 • Letter: P
Question
PLEASE HELP ME ANSWER THE BLANK SAID "SELECTED ANSWER INCORRECT"! THANK YOU!
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:
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 (P) or temporary (T).
c. Complete Schedule M-1 for Timpanogos.
d. Compute Timpanogos Inc.’s tax liability for 2018.
Complete this question by entering your answers in the tabs below.
Req A and B
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. Identify each book-tax difference as either permanent (P) or temporary (T). (Negative amounts should be indicated by a minus sign.)
Req C
Complete Schedule M-1 for Timpanogos. (Enter all values as positive numbers.)
Req D
Compute Timpanogos Inc.’s tax liability for 2018.
Life insurance proceeds as a result of CEO’s death $ 200,000 Revenue from sales (for both 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 and tax purposes 300,000 Interest income on tax-exempt bonds issued in 2017 40,000 Interest paid on loan obtained to purchase tax-exempt 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 MACRS depreciation 55,000 Book Depreciation 25,000 Net capital loss 42,000 Federal income tax expense for books in 2018 500,000Explanation / Answer
Part a)
Reconciliation of book income and taxable income
Description
Book income
Adjustments Dr.
Adjustments Cr.
Taxable income
Revenue from sales
2000000
2000000
Less: cost of goods sold
300000
300000
Gross profit
1700000
1700000
Other income:
Life insurance proceeds from CEO death
200000
200000 (P)
0
Interest income on tax exempt bonds
40000
40000 (P)
0
Rental income
25000
10000 (T)
30000 (T)
45000
Gross income
1965000
1745000
Expenses:
Interest paid to obtain tax exempt bonds
45000
45000 (P)
0
Net capital loss
42000
42000(P)
0
Depreciation
25000
30000 (T)
55000
Life insurance premiums
21000
21000 (P)
0
Federal income tax expense
500000
500000 (P)
0
Total expenses before charitable contribution
633000
55000
Income before charitable contribution
1332000
1690000
NOL carryover from prior year
0
Taxable income for charitable contribution
1690000
Charitable contribution
(180000)
12000 (T)
(168000)
Book/taxable income
1152000
(280000)
650000
1522000
Description
Book income
Adjustments Dr.
Adjustments Cr.
Taxable income
Revenue from sales
2000000
2000000
Less: cost of goods sold
300000
300000
Gross profit
1700000
1700000
Other income:
Life insurance proceeds from CEO death
200000
200000 (P)
0
Interest income on tax exempt bonds
40000
40000 (P)
0
Rental income
25000
10000 (T)
30000 (T)
45000
Gross income
1965000
1745000
Expenses:
Interest paid to obtain tax exempt bonds
45000
45000 (P)
0
Net capital loss
42000
42000(P)
0
Depreciation
25000
30000 (T)
55000
Life insurance premiums
21000
21000 (P)
0
Federal income tax expense
500000
500000 (P)
0
Total expenses before charitable contribution
633000
55000
Income before charitable contribution
1332000
1690000
NOL carryover from prior year
0
Taxable income for charitable contribution
1690000
Charitable contribution
(180000)
12000 (T)
(168000)
Book/taxable income
1152000
(280000)
650000
1522000
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