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linda_us, Master's Degree
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Experience:  A tutor for Business, Finance, Accounts and other related topics.
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Permtemp reported the following book income statement and

Customer Question

For 2012, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:
Sales $33,000,000
Cost of goods sold (22,000,000)
Gross profit $11,000,000
Dividend income 55,000
Tax-exempt interest income 15,000
Total income $11,070,000
Depreciation $ 800,000
Bad debts 625,000
Charitable contributions 40,000
Interest 455,000
Meals and entertainment 60,000
Other 4,675,000
Total expenses (6,655,000)
Net income before federal income taxes 4,415,000
Cash $ 2,125,000
Accounts receivable $ 3,300,000
Allowance for doubtful accounts (450,000) 2,850,000
Inventory 6,000,000
Fixed assets $10,000,000
Accumulated depreciation (1,600,000) 8,400,000
Investment in corporate stock 1,000,000
Investment in tax-exempt bonds 50,000
Total assets $20,425,000
Accounts payable $ 2,120,000
Long-term debt 8,500,000
Common stock 6,000,000
Retained earnings 3,805,000
Additional information for 2012:
• Depreciation for tax purposes is $2.45 million under MACRS.
• Bad debt expense for tax purposes is $425,000 under the direct writeoff method.
• Qualified production activities income is $3 million.
Required for 2012:
a. Prepare Form 1120, computing the corporation’s taxable income and tax liability.
b. Determine the corporation’s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Use the balance sheet information to prepare Schedule L of the 2012 Form 1120.
c. Prepare the 2012 Schedule M-3 for Form 1120.
d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate.
Submitted: 1 year ago.
Category: Single Problem
Expert:  Manal Elkhoshkhany replied 1 year ago.


Please advise your deadline

Thank you

Customer: replied 1 year ago.
Next Tuesday, I think I figured out most of them but not so sure about form 8903 Domestic Production Activies (checking figure $117,240) and form 4626 Alternative mininum tax.
Customer: replied 1 year ago.
Sorry, my mistake. Monday evening not Tuesday......
Expert:  Manal Elkhoshkhany replied 1 year ago.

That is ok :)

Which form are you supposed to use please? (What year?) I need to check the tax rates. Which textbook are you using please? (Title, author's name and edition)?

Customer: replied 1 year ago.
I will need form 1120, Schedule M-3, 8903, 4562, 4626, 1125-A and 2220. The textbook is Federal Taxation 2016 Thomas R. Pope 29th Edition. The tax year of the problem actually is 2014 :). I will appreciate very much if I can get the answer by tomorrow noon.
Customer: replied 1 year ago.
I need form 8903 & 4626 asap. Hope I didn't make you misunderstand when I said next Monday. What I mean was Monday 11/30 :(.
Expert:  Manal Elkhoshkhany replied 1 year ago.


No I know it is due 11/30 :), but I wanted to double check the problem and the problem does not require you to prepare form 8903. Another thing is I am not sure where you got $117,240 check figure, was that provided by your instructor? Cause it seems that this figure is not correct. I will opt out from answering the question so that it is open to all experts since I need to take a break. I will be able to see your response though and if I can figure it out before the deadline, I would do that but I wanted the problem to be available to other experts as well in case I cannot figure it out.

Finally, please advise the full name of the book. Is it Prentice Hall Federal Taxation for corporations, or Comprehensive?

Thank you

Customer: replied 1 year ago.
Federal Taxation for Corporations. I got $117,240 from my friend...not sure if it is corrected or not...Actually can you show me your work on form 8903 base on the information from the problem? "Qualified production activities income is $3 million." Also form 4626 :D
Customer: replied 1 year ago.
I believe the problem require form 8903 because they provide this information "Qualified production activities income is $3 million" - which is line 25 of form 1120.