FinalExamPracticeProblems - Chapter 16 Problem 86...

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Chapter 16 Problem 86Timpanogos Inc. is an accrual-method calendar-year corporation. For 2015, it reported financialstatement income after taxes of $1,152,000. Timpanogos provided the following informationrelating to its 2016 activities:Life insurance proceeds as a result of CEO’s death200,000Revenue from sales (for book and tax purposes)2,000,000Premiums paid on the key-person life insurance policies. Thepolicies have no cash surrender value.21,000Charitable contributions180,000Overhead costs that were expensed for book purposes but areincluded in ending inventory for tax purposes under § 263A.50,000Overhead costs that were expensed for book purposes in 201560,000but were included in 2015 ending inventory for tax purposesunder §263A. All 2015 ending inventory was sold in 2016.Cost of goods sold for book purposes300,000Interest income on private activity tax-exempt bonds issued in 201540,000Interest paid on loan obtained to purchase tax-exempt bonds45,000Rental income payments received and earned in 201615,000Rental income payments received in 2015 but earned in 201610,000Rental income payments received in 2016 but not earned by year end30,000MACRS depreciation55,000Book Depreciation25,000Alternative minimum tax depreciation50,000Net capital loss42,000Federal income tax expense for books in 2016500,000
Timpanogos did not qualify for the domestic production activities deduction.Required:a. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start withbook income and identify all of the adjustments necessary to arrive at taxable income.b. Identify each book-tax difference as either permanent or temporary.c. Complete Schedule M-1 for Timpanogos.d. Compute Timpanogos, Inc.’s regular tax liability for 2016.e. Determine Timpanogos’s alternative minimum tax, if any.0
*[T] reflects temporary book-tax differences and [P] reflects permanent book-tax differences(see requirement b).c. Timpanogos’s Schedule M-1 is as follows:d. Timpanogos’s regular tax liability is $514,080 ($1,512,000 × 34%).

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Term
Fall
Professor
Grud
Tags
Taxation in the United States, GTE

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