Question

Schedule M-1 (LO 11.4) Caloundra Corporation has book income of $40,000. Included in the book income is $3,000 of tax-exempt interest, $7,000 of book income tax expense, and a $2.000 non- deductible fine. Also included in book income are $10,000 of dividends Caloundra received from a 30% owned corporation Using this information and Form 1120, provide the amounts that go on each line on the form. Click here to access a blank Form 1120 and accompanying instructions. a. Form 1120, Schedule M-1 Line 1 $ 40,000 b. Form 1120, Schedule M-1, Line 10 $ 34,000 X 42,000 x c. d. Form 1120, Page 1, Line 28 Form 1120, Schedule C, Line 2(a) Form 1120, Schedule C, Line 2(c) 10,000 8,000 x e. Form 1120, Schedule C, Line 24 8,000 X 8,000 Form 1120, Page 1, Line 295 Form 1120, Page 1, Line 30 g. 34,000 7 Chock My Work Because of various provisions in the tax law, a corporation's taxable income seldom is the same as its accounting income (commonly referred to as "book Income"). The purpose of Schedule M-1 of the corporate tax return is to reconcile a corporation's book income to its taxable income, computed before the net operating loss and special deductions such as the dividends received deduction On the left side of Schedule M 1 are adjustments that must be added to book income, and on the right side of the schedule are adjustments that must be Previous Next >

Answer 1

Any income earned during the year and this will be only on the book and if there is any expenditure which is related to the business this will be deducted from the book profit.

Answer and Explanation:

Calculation of amount
Title	Amount
Form 1120, Schedule M-1, Line 10	$34,000
Form 1120, Page 1, Line 28	$42,000
Form 1120, Page 1, Line 30	$34,000
Working notes :-
Title	Calculations		Amount
Form 1120, Schedule M-1, Line 10	$40,000 + $2,000 - [ $10,000 * 80 % ]	$42,000 - 8,000	$34,000
Form 1120, Page 1, Line 28	$40,000 + $2,000		$42,000
Form 1120, Page 1, Line 30			$34,000
Form 1120, Schedule C, Line 24 , Line 2(c)	$10000 - $2000		$8000

Answer 2

Line 10: $46,000 ($40,000 - 3,000 + 7,000 + 2,000)

Line 28: $46,000 ^

Line 30: $39,500 ($46,000 - 6,500)