Schedule M-1 of Form 1120 Is Used to Reconcile Financial

question 54

Multiple Choice

Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income. Which of the following items is a subtraction on Schedule M-1?

• A) Book depreciation in excess of tax depreciation.
• B) Excess of capital losses over capital gains.
• C) Proceeds on key employee life insurance.
• D) Income subject to tax but not recorded on the books.
• E) None of the above.

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Definitions:

Expense Balances

The remaining amounts in an organization's expense accounts after all expenditures for the accounting period have been accounted for.

Adjusted Trial Balance

A listing of all company accounts that will appear on the financial statements after year-end adjustments are made.

Income Statement

A financial statement that provides a summary of a company's revenues, expenses, and profits/losses over a specific period of time.

Balance Sheet

A financial statement that presents a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.