Reference no: EM131765279

Question: Lamba Corporation reports the following items for book and tax purposes in its first year of operations (year 1)

	Book	Tax	Difference
Gross Receipts	1,500,000	1,500,000	0.00
Minus COGS	(550,000)	(550,000)	0.00
Gross profit from operations	950,000	950,000	0.00
Plus
Dividends from less than 20% owned corporations	10,000	10,000	0.00
Tax exempt income	3,000	0.00	3,000
Prepaid rental income	0.00	8,000	(8,000)
Minus
Operating Expenses	(300,000)	(300,000)	0.00
Dpreciation	(60,000)	(170,000)	110,000
Bad debt expense	(25,000)	(16,000)	(9,000)
Business Interest Expense	(75,000)	(75,000)	0.00
Insurance Premiums on life of key employee (Lamba is the beneficiary)	(2,800)	0.00	(2,800)
NOL disallowed for tax purposes	(12,000)	0.00	(12,000)
Net Income before special deductions	488,200
Taxabe income before special deductions		407,000
Additional Information
Federal income tax expense per books	151,640

Required: a. Prepare the 2016 Schedule M-1 for Form 1120.

b. Calculate Lamba's taxable income (the Schedule-1, line 10)

c. Calculate Lamba's Federal tax liability (show your calculation). The tax table is in your textbook.

d. Caculate Lamba's Federal effective tax rate. (show your calculation)