Rambler received dividend income from 25%-owned corporations totaling $40,000. I

Question

Rambler received dividend income from 25%-owned corporations totaling $40,000.

In December 2018, Rambler received $40,000 as an advance payment for an order from a customer. Rambler reported the $40,000 as a liability (unearned income) on its balance sheet at 12/31/18.

Rambler acquired another corporation in 2015, paying $450,000 for goodwill. Rambler recorded a goodwill impairment loss of $100,000 for financial purposes in 2018.

How would these three scenerios be shown on a 2018 M-1 Adjustment Schedule to reconcile book income to taxable income? Please explain your work.

Explanation / Answer

Dividend income: 40,000

Goodwill impairment loss: (100,000)

Net taxable income/(loss): (60000)

Unearned income will have no impact as the income is taxable when it is earned

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