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Unformatted text preview: TAX 5015 (Fall 2011) Chapter review exercise #2 Topic review: Corporations Taxable income, book income and Schedule M-1 Due date: September 8, 2011 Name(s): SOLUTION . Brady Corporation reported the following information for 2010: Item Balance Bad debt expense 25,178 Charitable contributions 16,672 Cost of goods sold 1,646,067 Dividend revenue (from a 5% owned domestic corporation) 18,282 Dividends paid 45,000 Interest revenue - City of Foxboro bonds 4,537 Interest revenue - U.S. Treasury bonds 2,652 Key-man life insurance premiums 3,142 Key-man life insurance proceeds received 500,000 Long-term capital gain 19,467 MACRS cost recovery 67,028 Straight line depreciation expense (used for book purposes) 37,000 Meals and entertainment 60,924 Other expenses 394,367 Salary expense 1,720,025 Salary expense - owner/employees 137,515 Sales 4,658,375 Short-term capital loss 5,960 Warranty expense 77,145 Additional information: Increase in balance of allow for doubtful accounts 2,535 Decrease in estimated product warranty liability 5,610 Brady also has a $6,000 NOL carry forward from 2009, a $4,000 short-term capital loss carry forward from 2007, and a $5,000 charitable contribution from 2009. Bradys qualified production activities income (QPAI) totaled $625,000 in 2010. [a]...
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