Problem
TSK Corp. reports the following information for 2020:
Book Net income after all taxes $700,000
Federal income tax expense 187,000
State tax expense 60,000
Net capital loss (9,000)
US Treasury Bond interest income 12,000
Excess charitable contributions 8,000
Penalty for late payment of federal taxes 5,000
Book depreciation in excess of tax depreciation 4,000
Installment sale proceeds (a) 20,000
Unappropriated retained earnings-1/1/20 900,000
Dividends paid in 2020 96,000
• The installment sale proceeds were from a sale in 2019:
Sales price $100,000-Adjusted basis $75,000= Gross profit $25,000. C Corp. will receive five year annual payments of $20,000.
a) Based on the above information, complete US Form 1120 Schedules M-1 and M-2, using a worksheet or IRS forms.
b) Briefly indicate the major differences between Form 1120 Schedules M-1 and M-3.