[MustPass1988]

I have a mental block with this topic and need help to understand this hw question.

Bishop Corporation reported taxable income of $700,000 on its federal income tax return for calendar year 2012. Selected info is available from Bishop’s records as follows:

Provision for federal income tax per books :$238,000

Depreciation claimed on tax return: $130,000

Depreciation recorded in the books: $75,000

Life Insurance Proceeds on death of corporate officer: $100,000

Bishop reported net income per books for 2012 of:________

The answer is $617,000 but I just need help understand how to determine which amounts to add back in and which amount to subtract out.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[KGC111210]

$700,000 taxable income

less $238,000 provision expense because actual expense on books not tax

plus difference in depreciation of $55,000 not included on books

plus $100,000 life insurance proceeds on the books that's non taxable.

equals $617,000

I think this is right.

FAR 69, 74, 78
REG 69, 69, 69, 82
BEC 75
AUD 76

[KGC111210]

Further –

1. Federal income tax is non deductible on your tax return so no where will there be a business expense for estimate of federal income tax expense so you would minus this from taxable income because it is expensed on the books.

2. There are temporary difference usually from the return and the books due to excess depreciation due to MACRS and due to Section 179 expenses.

3. It appears based on the income recognition that the company was the beneficiary of the life insurance which makes it nontaxable.

Hope this helps, if I'm right.

FAR 69, 74, 78
REG 69, 69, 69, 82
BEC 75
AUD 76

[JoeL]

You need to know which item should included and disallowed in Book, which item should be included and disallowed in Tax.

Federal Tax expense is included in Book as expense, but not deductible in Tax, you need to add it back

Depreciation: add back book depreciation, deduct tax depreciation, because depreciation is different between book and tax

Life insurance proceed is included in Book as income, But it is Tax-free, so should deduct from book income

[General_Ledger]

Hey! Where did you get this question??? I need to fully understand this concept… this is the type of questions that killed me on the test.

FAR 73, 75*, 79! n DONE!
BEC 72, 75
AUD 64, 75
REG 43, 74, 72, 70, 88!
*Expired...FML

HELLO 300 CLUB! 6/8/13

[Anonymous]

This is from Becker Passmaster i think.

[MustPass1988]

It's from the Wiley Testbank. I think I'm understanding it a bit more…its just a strange concept to me i guess

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Anonymous]

You can look at it this way:

Net income per books = Taxable income + Permanent difference+ [adjustment of book expenses i.e net temp. difference]

= 700,000+100,000+ (-238000-75000+130000)

=6170000

Note:

1. Provision for fed. tax is generally deducted from Income (so deducted)

2. Depreciation is deducted from Income (so deducted)

3. Depreciation for tax purposes (130000) was also actually deducted from Income to reach taxable income of 700,000 ( so added back)

I hope it makes sense.

[Anonymous]

You can look at it this way:

Net income per books = Taxable income + Permanent difference+ [adjustment of book expenses i.e net temp. difference]

= 700,000+100,000+ (-238000-75000+130000)

=6170000

Note:

1. Provision for fed. tax is generally deducted from Income (so deducted)

2. Depreciation is deducted from Income (so deducted)

3. Depreciation for tax purposes (130000) was also actually deducted from Income to reach taxable income of 700,000 ( so added back)

I hope it makes sense.

[Author]

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