Question

C CORPORATION BOOK-TO-TAX RECONCILIATION. Cavalier Corporation, an accrual basis, calendar year C Corporation, began operations on July 6, 2009. For each item below, determine the 2019 schedule M-1 adjustment to reconcile book income to taxable income, i.e., the amount and the effect ( + or - ).

Net income per books	$850,000
Provision for Federal Income Taxes, $180,000
Municipal bond interest, $15,000
During 2019, Cavalier increased its allowance for uncollectible accounts by $30,000; actual bad debt written off in 2019 was $26,000
Cavalier reported depreciation for financial purposes of $115,000; MACRS, Bonus and §179 amounts for the year were $150,000
Cavalier acquired another corporation in 2015, paying $450,000 for goodwill. Cavalier recorded a goodwill impairment loss of $75,000 for financial purposes in 2019
In December 2018, Cavalier received $40,000 as an advance payment for rental of property. Cavalier reported the $40,000 as a liability (unearned income) on its balance sheet at 12/31/18 and as earned income in 2019
In December 2019, Cavalier received $30,000 as an advance payment for rental of property. Cavalier reported the $30,000 as a liability (unearned income) on its balance sheet at 12/31/19
Cavalier reported gains of $8,000 and losses of $36,000 from the sale of investments in its “Other Revenue & Expenses” section of its income statement
Cavalier received dividend income from 25% owned corporations totaling $40,000
Cavalier deducted a $40,000 excess charitable contribution carryover from 2016 on its 2019 tax return
In May 2019, Cavalier paid a $15,000 fine to a local government for violating a local ordinance
Taxable Income

Answer 1

CALCULATION OF TAXABLE INCOME OF CAVALIER AS ON JULY 2019

PARTICULARS	AMOUNT	AMOUNT
NET INCOME AS PER BOOKS		$ 8,50,000
ADD:-
bad debts written off		$ 26,000
goodwill for acquiratiom		$ 4,50,000
dividend income		$ 40,000
excess deduction in charitable contribution		$ 40,000
fine to local government for violating a local ordiance		$ 15,000
total addition amount		$ 5,56,000
total		$ 14,06,000
SUBTRACT:-
provisions for federal income taxes	$( 1,80,000)
municipal bond interest	$( 15,000)
increase in allowance for uncollectable accounts	$ (30,000)
depreciation for financial purpose	$ (1,15,000)
marcs bonus	$ (1,50,000)
goodwill impairment loss	$ (75,000)
unearnedb income	$ (40,000)
others revenue and expenses loose on sale of investment gains - looses 8000- (36,000)	$ (28,000)
total deductions	$ (4,83,000)
total taxable amount		$ 9,23,000