Question

Prepare an M-1 reconciliation for MDC Corporation (for tax year 2018) using the following data:

Net income per books (after tax)

500,000

Federal income tax per books

150,000

Excess of capital losses over capital gains

100,000

Dividend income (MDC owns 1% of the paying corporation)

150,000

Marketing expense

80,000

Entertainment expense (total amount)

68,000

Tax-exempt interest income (private activity bond)

9,000

Book (GAAP) depreciation in excess of tax (MACRS) deprecation

150,000

Answer 1

M-1 reconciliation for MDC Corporation

Net income per books (after tax) $500,000

Add: Item that decreased net income

but did not affect taxable income

Federal income tax per books $150,000

Excess of capital losses over capital gains $100,000

Marketing expense $80,000

Entertainment expense $68,000

Book (GAAP) depreciation in excess $150,000 $548,000

of tax (MACRS) deprecation

Less: Items that increased net income per

books but did not affect taxable income

Dividend income $150,000

Tax-exempt interest $9,000 $159,000

Taxable Income $889,000