Reference no: EM132895454

Question - Cramer Corporation, a calendar year, accrual basis corporation, reported $1 million of net income after tax on its 2020 financial statements prepared in accordance with GAAP. The corporation's books and records reveal the following information:

-Cramer's federal income tax expense per books was $200,000.

-Cramer's book income included $10,000 of dividends received from a domestic corporation in which Cramer owns a 25 percent stock interest, and $4,000 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.

-Cramer recognized $10,000 of capital losses this year and no capital gains.

-Cramer recorded $8,000 of book expense for meals and $10,000 of book expense for entertainment costs.

-Cramer's depreciation expense for book purposes totaled $400,000. MACRS depreciation was $475,000.

Required -

1. Compute Cramer's federal taxable income and regular tax liability.

2. Computer Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable income.