Book/Tax Differences - CPA Regulation (REG)
Card 1 of 24
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Tap to reveal answer
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
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Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Tap to reveal answer
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
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Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Tap to reveal answer
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
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Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Tap to reveal answer
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
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A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
Tap to reveal answer
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
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Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Tap to reveal answer
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
← Didn't Know|Knew It →
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Tap to reveal answer
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
← Didn't Know|Knew It →
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Tap to reveal answer
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
← Didn't Know|Knew It →
Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Tap to reveal answer
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
← Didn't Know|Knew It →
Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Tap to reveal answer
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
← Didn't Know|Knew It →
A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
Tap to reveal answer
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
← Didn't Know|Knew It →
Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Tap to reveal answer
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
← Didn't Know|Knew It →
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Tap to reveal answer
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
← Didn't Know|Knew It →
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Tap to reveal answer
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
← Didn't Know|Knew It →
Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Taxi Co. reported book income of $140,000. Included in that amount was $50,000 for meal expenses and $40,000 for federal income tax expense. In Taxi’s Schedule M-1 of Form 1120, which reconciles book income and taxable income, what amount should be reported as taxable income?
Tap to reveal answer
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
To calculate taxable income from book income, income tax expense must be added back before reconciling. Additionally, meal expenses are 50% deductible for tax purposes, meaning half of the expense must be removed to arrive at tax income. So, to calculate taxable income:
$140,000 + $40,000 + ($50,000 * 50%) = $205,000
← Didn't Know|Knew It →
Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Of the following items, which should be included on Schedule M1 of form 1120 to reconcile book income to taxable income?
Tap to reveal answer
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
Of the following items, only premiums paid on key person’s life insurance policy is a difference between book and tax.
← Didn't Know|Knew It →
A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
A C Corp had a beginning credit balance in its warranty reserve account of $120,000. During the year, it accrued estimated warranty expense of $16,000. At the end of the year, the Corp’s warranty reserve had a $90,000 credit balance. What amount of warranty expense should the C Corp deduct?
Tap to reveal answer
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
Companies may only deduct the actual amount of cost incurred in meeting their warranty obligations. The actual cost incurred by the Corp in meeting its warranty obligation is calculated as $120,000 + $16,000 - $90,000 = $46,000.
← Didn't Know|Knew It →
Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Of the following items, which would result in a permanent book to tax difference as compared to a temporary?
Tap to reveal answer
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
Muni bonds are local government bonds which are tax-deductible for federal purposes. This income will never be taxed at the federal level, thus creating a permanent difference.
← Didn't Know|Knew It →
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Vital Corp. is an accrual-basis, calendar-year C corporation. Its year 2 reported book income before federal income taxes was $500,000. Included in that amount were the following items:
- Year 1 state franchise tax refund: $50,000
- Municipal bond interest income: 7,500
What should be the amount of Vital's year 2 taxable income as reconciled on Vital's Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?
Tap to reveal answer
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
Municipal bond interest income is not taxable, and so must be deducted from book income to determine taxable income. The state tax refund, however, is treated the same for book and tax purposes. As a result, to arrive at tax income, only the bond interest must be removed: $500,000 - $7,500 = $492,500.
← Didn't Know|Knew It →
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Which of the following items should be included on Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, U.S. Corporation Income Tax Return, to reconcile book income to taxable income?
Tap to reveal answer
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
Life insurance expenses paid on key individuals in the corporation are not treated as expenses for tax purposes, and as a result must be included on Schedule M-1. The rest of the options are all either treated the same for book and tax purposes or are non-taxable transactions.
← Didn't Know|Knew It →