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

question 105

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 these.

---

Definitions:

Operating

Related to the day-to-day functions and tasks involved in running a business or an organization.

Investing

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Financing Sections

Parts of financial statements or reports that detail how a company finances its operations, typically including borrowing, repaying debt, and issuing equity.

Indirect Method

A way of calculating cash flows for the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital.