Choice "a" is correct. The M-1 reconciliation of book income to taxable
income would be as follows: Book income | $ 140,000 | Federal income tax expense deductible from book income, but not
deductible for tax purposes | 40,000 |
| 180,000 | 50% × $50,000 meals and entertainment expenses not deductible for tax
purposes, but deductible from book income | 25,000 | Taxable income | $ 205,000 |
Choice "d" is incorrect. 50% of the $50,000 meals and entertainment expenses
are disallowed for tax purposes. Choice "c" is incorrect. The $40,000 federal income tax expense is not
deductible for tax purposes. Choice "b" is incorrect. The $40,000 federal income tax expense and 50% of
the $50,000 meals and entertainment expenses are not deductible for tax
purposes. |
