Question

Media Corp. is an accrual-basis, calendar-year C corporation. Its reported book income included $6,000 in municipal bond interest income. Its expenses included $1,500 of interest incurred on indebtedness used to carry municipal bonds and $8,000 in advertising expense. What is Media's net M-1 adjustment on its Form 1120, U.S. Corporation Income Tax Return, to reconcile to its taxable income?

(A) $1,500
(B) $3,500
(C) $9,500
(D) $(4,500)

Answer 1

Media's net M-1 adjustment to reconcile to its taxable income is $4500

Step-by-step explanation:

Given data:

Interest income =$6000

The amount of expenses on indebtedness = $1500

Advertising expenses = $8000

Media's net M-1 adjustment is calculated as

M-1 adjustment = interest income - The amount of expenses on indebtedness

M-1 adjustment = $6000 - $1500

M-1 adjustment = $4500

Media's net M-1 adjustment to reconcile to its taxable income is $4500