Problem NO: 41

Timpanogos Inc. is an accrual-method, calendar-year corporation. For 2024, it reported financial statement income after taxes of $1,342,000. Timpanogo

Timpanogos Inc. is an accrual-method, calendar-year corporation. For 2024, it reported financial statement income after taxes of $1,342,000. Timpanogos provided the following information relating to its 2024 activities:

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Life insurance proceeds as a result of CEO’s death $200,000

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Revenue from sales (for book and tax purposes) 2,000,000

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Cost of goods sold for book and tax purposes   300,000

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Premiums paid on the key-person life insurance policies (the

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policies have no cash surrender value)     21,000

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Charitable contributions     180,000

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Interest income on tax-exempt bonds    40,000

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Interest paid on loan obtained to purchase tax-exempt bonds     45,000

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Rental income payments received and earned in 2024     15,000

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Rental income payments received in 2023 but earned in 2024     10,000

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Rental income payments received in 2024 but not earned by year-end    30,000

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Tax depreciation    55,000

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Book Depreciation    25,000

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Net capital loss    42,000

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Federal income tax expense for books 310,000

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Required: 

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a. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income.

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b. Identify each book-tax difference as either permanent or temporary.

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c. Complete Schedule M-1 for Timpanogos.

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d. Compute Timpanogos, Inc.’s tax liability.

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