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 Form 1120 in Appendix B if you need assistance ). Problem C3-59 Reconciling Book Income and Taxable Income . Zero Corporation reports the following results for the current year : Net income per books ( after taxes ) $ 33,000 Federal income tax per books 12,000 Tax-exempt interest income 6,000 Interest on loan to purchase tax-exempt bonds 8,000 MACRS depreciation exceeding book depreciation 3,000 Net capital loss 5,000 Insurance premium on life of corporate officer where Zero is the beneficiary 10,000 Excess charitable contributions carried over to next year 2,500 U . S . production activities deduction 1,000 Prepare a reconciliation of Zero ’ s taxable income before special deductions with its book income .
Case Study I10-52 Able Corporation is a manufacturer of electrical lighting fixtures . Able is currently negotiating with Ralph Johnson , the owner of an unincorporated business , to acquire his retail electrical lighting sales business . Johnson ’ s assets that are to be acquired include the following :