Question: Lamba Corporation reports the following items for book and tax purposes in its first year of operations (year 1)
|
Book |
Tax |
Difference |
| Gross Receipts |
1,500,000 |
1,500,000 |
0.00 |
| Minus COGS |
(550,000) |
(550,000) |
0.00 |
| Gross profit from operations |
950,000 |
950,000 |
0.00 |
|
|
|
|
| Plus |
|
|
|
| Dividends from less than 20% owned corporations |
10,000 |
10,000 |
0.00 |
| Tax exempt income |
3,000 |
0.00 |
3,000 |
| Prepaid rental income |
0.00 |
8,000 |
(8,000) |
|
|
|
|
| Minus |
|
|
|
| Operating Expenses |
(300,000) |
(300,000) |
0.00 |
| Dpreciation |
(60,000) |
(170,000) |
110,000 |
| Bad debt expense |
(25,000) |
(16,000) |
(9,000) |
| Business Interest Expense |
(75,000) |
(75,000) |
0.00 |
| Insurance Premiums on life of key employee (Lamba is the beneficiary) |
(2,800) |
0.00 |
(2,800) |
| NOL disallowed for tax purposes |
(12,000) |
0.00 |
(12,000) |
| Net Income before special deductions |
488,200 |
|
|
| Taxabe income before special deductions |
|
407,000 |
|
|
|
|
|
| Additional Information |
|
|
|
| Federal income tax expense per books |
151,640 |
|
|
|
|
|
|
Required: a. Prepare the 2016 Schedule M-1 for Form 1120.
b. Calculate Lamba's taxable income (the Schedule-1, line 10)
c. Calculate Lamba's Federal tax liability (show your calculation). The tax table is in your textbook.
d. Caculate Lamba's Federal effective tax rate. (show your calculation)