Question

# Problem 11-7 (Algorithmic) Schedule M-1 (LO 11.4) The Loquat Corporation has book net income of \$163,000...

Problem 11-7 (Algorithmic)
Schedule M-1 (LO 11.4)

The Loquat Corporation has book net income of \$163,000 for the current year. Included in this figure are the following items, which are reported on the corporation's Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return.

 • Federal income tax expense \$24,450 • Depreciation deducted on the books which is not deductible for tax purposes 32,600 • Deduction for 50 percent of meals and entertainment expense which is not allowed for tax purposes 14,670 • Deduction for a tax penalty not allowed for tax purposes 6,520 • Tax-exempt interest income included in book income but not in tax income 9,780

Calculate Loquat Corporation's taxable income for the current year based on the information given.
\$________________

SOLUTION

 Particulars Amount (\$) Net income as per books 163,000 Federal income tax expense 24,450 Depreciation deducted on the books which is not deductible for tax purposes 32,600 Deduction for 50 percent of meals and entertainment expense which is not allowed for tax purposes 14,670 Deduction for a tax penalty not allowed for tax purposes 6,520 Less: Tax-exempt interest income included in book income but not in tax income (9,780) Taxable income 231,460

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