Converting Book Income to Taxable Income . The following income and expense accounts appeared in the accounting records of Rocket Corporation , an accrual basis taxpayer , for the current calendar year . ... .... .... ... ( details in the pdf file ) The following additional information applies . 1 . Dividends were from Star Corporation , a 30 % -owned domestic corporation . 2 . Interest revenue consists of interest on corporate bonds , $ 15,000 ; and municipal bonds , $ 3,000 . 3 . The stock is a capital asset held for three years prior to sale . 4 . Rocket uses the specific writeoff method of accounting for bad debts . 5 . Interest expense consists of $ 11,000 interest incurred on funds borrowed for working capital and $ 1,000 interest on funds borrowed to purchase municipal bonds . 6 . Rocket paid all contributions in cash during the current year to State University . 7 . Rocket calculated depreciation per books using the straight-line method . For income tax purposes , depreciation amounted to $ 85,000 . 8 . Other expenses include premiums of $ 5,000 on the key-person life insurance policy covering Rocket ’ s president , who died in December . 9 . Qualified production activities income is $ 250,000 . Required : Prepare a worksheet reconciling Rocket ’ s book income with its taxable income ( before special deductions ). Six columns should be used — two ( one debit and one credit ) for each of the following three major headings : book income , Schedule M-1 adjustments , and taxable income . ( See the sample worksheet with