Situation

Alaska, Inc. is an accrual-basis C corporation that was incorporated on January 1, year 1.At the end of year 2, the corporation is considering converting to an S corporation.Alaska is required to determine its accumulated earnings and profits prior to conversion.The company has already calculated book net income, taxable income, and prior year accumulated earnings and profits, and is now attempting to calculate the company's current earnings and profits.

For purposes of this task, assume that all items of income and expense have been properly reported by Alaska on Form 1120, US Corporation Income Tax Return, for the appropriate years.Starting with taxable income as a benchmark, indicate the effect of each of the following items in the calculation of current year earnings and profits by doble-clicking in the shaded cell and selecting the appropriate entry.