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ELDE CORPORATION IS IN THE BUSINESS OF SELLING USED CARS ON INSTALLMENT CONTRACTS. THIS YEAR NET...

ELDE CORPORATION IS IN THE BUSINESS OF SELLING USED CARS ON INSTALLMENT CONTRACTS.

THIS YEAR NET INCOME PER BOOK OF 500,000 BEFORE TAXES

GROSS PROFIT FROM INSTALLMENT SALES IS 300,000 FOR THE YEAR.

FOR BOOK PURPOSES RECOGNIZES GROSS PROFIT OF 175,000.

WHAT IS TAXABLE INCOME ON SCHEDULE M1 FORM 1120 FOR THE YEAT

325000

625000

675000

800000

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Answer #1

ELDE Corporation will report Taxable income of 800000 on schedule M1 Form 1120.

The main purpose of M1 is to reconcile entity's accounting income(i.e book income) with its taxable income. Since,tax laws are different from books requirement book income can differ from taxable income. In the given sum net book profit of 500000 along with 300000 would be taxable income instead of 175000 because rest of 125000 would be taken as income on tax return not included on books being installment sales. Hence, taxable income would be 800000.

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