Book Balance Adjustment Book Balance Adjustment Trial Balance Tax Return
Description DR CR DR CR DR CR DR CR DR CR Summary Tic Marks
3,622,000 3,622,000 108,818 108,818 3,715,818 3,715,818 341,318 341,318 3,725,818 3,715,818
- - (10,000)
Schedule M-1: Reconciliation of income (Loss) per books with Income per Return.
1. Net Income (loss) per books: 450,182 The Tax-obligation payment is calculated in the sheet following.
2. Federal Income Tax per books: 240,550 The FIT payment throughout the year was 150,000, paid on time.
3. Excess of Capital losses over cap gains: 2,000 The sum of these payments was under the actual liability. Temporary
4. Income Subject to tax not recorded on books this year: Capital losses can only offset capital gains. Will carried back 3 years,
5. Exp. recorded on books this year, not deducted on this return: then forward five years to offset Cap gains. T, but P if they expire
a. Depreciation: Book Depreciation was less than tax treatment. Not added back
b. Charitable Contributions Charitable contributions were fully deductable. See Calculations.
c. Travel & Entertainment: 11,000 6K: The treatment of the Bengals box under IRC 274(l)(2)- Skyboxes
d. Other (itemize): 5K: For the tickets, the section before: IRC 274(l)(1)(A), Permanent
Bad Debt Expense 4000 Actual Bad Debt Expense is deductible under IRC 166(d)(2) Temporary
Tax Penalty assessed 3268 Underpayment penalty is calculated in the following sheets. Temporary
Key employee Life Insurance: 10,000 28,268 Life Insurance Premiums are not deductible under IRC 264. Permanent
6. Add lines 1-5: 721,000
7. Income recorded on books this year but not included on this return.
a. Tax exempt interest:
b. Other: Itemize
8. Deductions on this return not charged against book income this year.
a. Depreciation: 10,000 Depreciation was 50K under tax treatment, temporary difference.
b. Charitable Contributions: The amounts will resolve when the asset(s) are fully depreciated
c. Other (Itemize):
10,000
9. Add lines 7 and 8: 10,000
10. Income - line 6 less line 9: 711,000
COMPUTATION OF TAXABLE INCOME
Sales 2,100,000 The first adj. from Book Value is the Bad Debt expense being adjusted to actual
Dividend Received 5,000 amount. The book value was estimated at 5000, but end of year adjustment was
Interest Income on US Treasury Bonds 10,000 shown to be only 1000. The IRS reference for Bad Debt Expense is IRC 166(d)(2)
Long Term Capital gain It is fully deductible as it is incurred by a corporation in the course of business.
2,115,000
Less: Cost of Goods Sold The depreciation under MACRS was 10,000 more than BV. (50K-40K)
Opening Stock 375,000
Purchases 700,000 The meals & entertainment is calculated as below:
1,075,000 Meals & Entertainment
Closing Inventory 360,000 Cost 16,000
Gross Profit 715,000 Less: Cost of Suite 6,000
10,000
Gross Profit 1,400,000
50% Allow Deduction 5,000 IRC 274(l)(1)(A)
Operating Expenses
Salaries-Officers 210,000 Charitable Contribution is subject to a 10% limitation as calculated below. IRC 170(b)(2)
Salaries-Sales & Clerical 265,000 Charitable Contribution
Repairs & Maintenance 20,000 Taxable Income before DRD 711,000
Bad Debt expense 1,000 10% rate limitation: - 10%
Interest Expense 14,000 Maximum CC deduction 2013 71,100
Charitable Contributions 60,000 Actual CC's 2013 60,000 Under the max, thus fully deductible
Depreciation (per MACRS) 50,000
Advertising 14,000
Meals & Entertainment 5,000
Taxes (State, local & payroll) 50,000
Total Allowable Deductions 689,000
Event Date Amount Due Amount Paid Balance Due Percent # of days Penalty
Amount Due 4/15/2012 60,136 60136 6% 0
Payment 4/15/2012 37500 22636 6% 61 227