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

question 19

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 an addition on Schedule M-1?

• A) Tax depreciation in excess of book depreciation.
• B) Proceeds of life insurance paid on death of key employee.
• C) Excess of capital losses over capital gains.
• D) Tax-exempt interest.
• E) None of these.

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Definitions:

Maker

In financial terms, the party that issues or creates an instrument, such as a check or promissory note, effectively promising to pay the amount specified.

Credit Sales

refers to sales in which the buyer is permitted to pay at a later date, commonly used in business to business transactions.

Specific Customers

Refers to the particular group or segment of customers targeted by a business for its products or services.

Annual Interest Rate

The percentage increase in the amount of money owed as interest on a loan or investment, calculated on an annual basis.