Part I: M-1 Information for Tango Inc., an accrual basis corporation

Net income per books (after-tax) $174,100

Federal income tax expense per books $86,600

Tax-exempt interest income $4,500

MACRS depreciation** $7,200

Excess of capital loss over capital gains $9,400

Nondeductible meals and entertainment $5,500

Interest on loan to purchase tax-exempt bonds $1,100

** This is depreciation in excess of straight-line depreciation used for financial statement purposes

Part II: M-2 Information for Bravo Inc., an accrual basis corporation

Net income per books (after-tax) $386,250

Taxable income $120,000

Federal income tax per books $30,050

Cash dividend distributions $150,000

Unappropriated retained earnings, as of January 1, 2018 $796,010


  1. Reconcile book income to taxable income for Tango Inc. and Bravo Inc. Be sure to start with book income, explain and identify all the adjustments necessary to arrive at taxable income.
  2. Identify each book-tax difference as either temporary or permanent and explain your determination.
  3. Complete Schedule M-1 using ProConnect or fillable forms. Submit it as a PDF or convert it to a Word
  4. Complete Schedule M-2 for Bravo Inc. and submit it as a PDF or convert it into a Word document.

Clearly identify the requirements being addressed. Your assignment should consist of a single PDF or Word document, clearly identifying the requirements being addressed. Show all calculations within the discussion or in an embedded Excel spreadsheet. Make good use of comments to convey your thought process as well.

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