The following information for 2016 relates to Purple Corp, a calendar year, accrual method taxpayer.
Net Income per books (after-tax) $250,000
Federal income tax per books 122,250
Meals & Entertainment (amount deducted on GAAP financial statements) 8,400
Depreciation (amount deducted on GAAP financial statements) 145,000
Depreciation (amount calculated for tax purposes under MACRS) 130,000
Fine for Speeding tickets 6,250
Amortization (GAAP) 0
Amortization (Tax) 10,750
Country Club Dues 11,000
Accrued Vacation not deducted on 12/31/15 Return 15,000
Accrued Vacation @ 12/31/16 (7,500 paid by 3/15/17) 25,000
Allowance for Bad Debts on Balance Sheet @ 12/31/15 13,200
Allowance for Bad Debts on Balance Sheet @ 12/31/16 15,750
The M-1’s for most of the Income Statement items (expenses) are just the amount of the expense, but for the Balance Sheet items we usually have to take the change in the value from the prior year to the current year. Find the taxable income, it should be $403,000
Find Taxable income on Form L and M1 (Excel is acceptable)