Cramer Corporation, a calendar year, accrual basis corporation, reported $1.30 million of net income after tax on its financialstatements prepared in accordance with GAAP. The corporation's books and records reveal the following information:• Cramer's federal income tax expense per books was $206,000.• Cramer's book income included $16,000 of dividends received from a domestic corporation in which Cramer owns a 25 percentstock interest, and $7,000 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.• Cramer recognized $16,000 of capital losses this year and no capital gains.• Cramer recorded $11,000 of book expense for meals not provided by a restaurant and $13,000 of book expense for entertainmentcosts.• Cramer's depreciation expense for book purposes totaled $406,000. MACRS depreciation was $475,000.Required:a. Compute Cramer's federal taxable income and regular tax liability.b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable incomeAnswer is complete but not entirely correct.Complete this question by entering your answers in the tabs below.Required A Required BCompute Cramer's federal taxable income and regular tax liability. (Enter your answers in whole dollars not in millions.)Amount$ 761,400Taxable incomeTax liability$369,894 Required A Required B.Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable income. (Any Expenses (Line 5) and Deductions (Lin-are not included under Depreciation, Charitable Contributions, and Travel and Entertainment should be combined in the corresponding line"Other". Enter all amounts as positive. Enter your answers in whole dollars not in millions.)ShcScheduleM-1Reconciliation of Income (Loss) per Books With Income per ReturnNote: The corporation may be required to file Schedule M-3. See instructions.1 Net Income (loss) per books2 Federal income tax per books1,600,000 7 Income recorded on books this year not included on212,00022,000this return (dernize)3 Excess of capital losses over capital gains -Tax-exempt interest04 Income subject to tax not recorded on books thisyear(domizo)005 Exponses recorded on books this year not deducted8 Deductions on this return not charged against bookonthis return (itemizo)income this year (temize)a Depreciationa Depreciation063,0000b Chantable contributions0b Chantable contributionsc Travel and entertainment23,000c Other (include all items)063,00063,000d Other (include all items)9 Add lines 7 and 823,0001,857,00010 Income (page 1, line 28)-line 6 less line 91,794,0006 Add Iines 1 through 5THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAXFILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education.***33*

Question

Cramer Corporation, a calendar year, accrual basis corporation, reported $1.30 million of net income after tax on its financialstatements prepared in accordance with GAAP. The corporation's books and records reveal the following information:• Cramer's federal income tax expense per books was $206,000.• Cramer's book income included $16,000 of dividends received from a domestic corporation in which Cramer owns a 25 percentstock interest, and $7,000 of dividends from a domestic corporation in which Cramer owns a 5 percent stock interest.• Cramer recognized $16,000 of capital losses this year and no capital gains.• Cramer recorded $11,000 of book expense for meals not provided by a restaurant and $13,000 of book expense for entertainmentcosts.• Cramer's depreciation expense for book purposes totaled $406,000. MACRS depreciation was $475,000.Required:a. Compute Cramer's federal taxable income and regular tax liability.b. Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable incomeAnswer is complete but not entirely correct.Complete this question by entering your answers in the tabs below.Required A Required BCompute Cramer's federal taxable income and regular tax liability. (Enter your answers in whole dollars not in millions.)Amount$ 761,400Taxable incomeTax liability$369,894 Required A Required B.Prepare a Schedule M-1, page 6, Form 1120, reconciling Cramer's book and taxable income. (Any Expenses (Line 5) and Deductions (Lin-are not included under Depreciation, Charitable Contributions, and Travel and Entertainment should be combined in the corresponding line&#34;Other&#34;. Enter all amounts as positive. Enter your answers in whole dollars not in millions.)ShcScheduleM-1Reconciliation of Income (Loss) per Books With Income per ReturnNote: The corporation may be required to file Schedule M-3. See instructions.1 Net Income (loss) per books2 Federal income tax per books1,600,000 7 Income recorded on books this year not included on212,00022,000this return (dernize)3 Excess of capital losses over capital gains -Tax-exempt interest04 Income subject to tax not recorded on books thisyear(domizo)005 Exponses recorded on books this year not deducted8 Deductions on this return not charged against bookonthis return (itemizo)income this year (temize)a Depreciationa Depreciation063,0000b Chantable contributions0b Chantable contributionsc Travel and entertainment23,000c Other (include all items)063,00063,000d Other (include all items)9 Add lines 7 and 823,0001,857,00010 Income (page 1, line 28)-line 6 less line 91,794,0006 Add Iines 1 through 5THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAXFILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education.***33*

Accepted Answer

Income Tax -
Federal, state, and local governments levy taxes on the gross income of individuals and…