Homework2 Please check the attachment below. Please give the completely work on Sunday, Feb 13th, before 12Pm with Chicago timezone. Banjo Corporation is

Please check the attachment below.

Please give the completely work on Sunday, Feb 13th, before 12Pm with Chicago timezone.

Banjo Corporation is a subchapter C corporation located in Champaign, IL, and is a client of your accounting firm. Banjo Corp. manufactures and sells musical instruments through their webstore and physical location. The manager on the engagement assigned you to prepare the book to tax reconciliation below. The manager would like to remind you that the reconciliation format should be such that the column labeled “Book”, which is Banjo’s book profit and loss statement, plus the column labeled “Book-tax differences” should equal the column labeled “Tax”(sign +/- matters). Banjo typically has gross income much greater than $26m and is therefore required to use accrual basis for tax purposes. Show your work for calculations and any potential limitations.

Banjo Corp. Profit and Loss for the Year Ended December 31, 2021

 

Book

Book-tax Difference

Tax

Sales

$ 125,350,000

 

 

Interest income

$ 1,200,000

 

 

Income from Investments

$ 8,000,000

 

 

Capital gain (loss)

$ (3,750,000)

 

 

Salaries

$ (50,000,000)

 

 

Employee benefits

$ (12,000,000)

 

 

Utilities

$ (800,000)

 

 

Repairs and maintenance

$ (2,500,000)

 

 

Supplies

$ (17,000,000)

 

 

Rent

$ (10,000,000)

 

 

Bad debt expense

$ (800,000)

 

 

Insurance

$ (1,500,000)

 

 

Meals

$ (900,000)

 

 

Entertainment

$ (825,000)

 

 

Travel

$ (1,100,000)

 

 

Business interest expense

$ (7,500,000)

 

 

Charitable contributions

$ (5,000,000)

 

 

Depreciation

$ (10,000,000)

 

 

DRD

 

 

 

Net

$ 10,875,000

 

 

Additional information about Banjo Corp:

1. All of the charitable contributions were made in cash.

2. Meals all had a valid business purpose and were all purchased from a restaurant.

3. Entertainment was for various activities during which Banjo conducted meetings with important customers and suppliers.

4. Banjo had no floor plan financing.

5. Interest income included $260,000 from a Cook County bond issue to fund municipal property improvements.

6. A review of the accounts receivable subledger revealed the following accounts that are deemed to be uncollectible:

a. Jack Rabbit Studios $111,000

b. Miles of Chords $280,000

c. National Instrument Sales $146,000

d. Barry’s Banjo Bin $600,000

e. Power Notes $317,000

7. Banjo received $2,000,000 of dividends from Billy’s Band, Inc. in which Banjo owns a 3% share.

8. Banjo also received $2,000,000 of dividends from Musical Manny’s, Inc. in which Banjo owns at 40% share. Included in Income from Investments is $4,000,000 which is Banjo’s 40% share of Musical Manny’s income.

9. Banjo’s MACRS depreciation schedule shows a total of current year depreciation of $8,250,000.

10. Not included in the MACRS depreciation is the cost recovery for the following assets placed in service during 2020 (these were the only assets placed in service during the year:
Asset Date Cost

computer equipment 4/2/2021 $150,000

delivery truck 9/12/2021 $250,000

storage building 11/1/2021 $5,000,000

Banjo chooses to claim the maximum amount of depreciation allowable under the law.

11. Banjo’s CEO has a compensation package which included the following expenditures for 2020:

a. Cash compensation $800,000

b. Performance bonus $100,000

c. Non-taxable fringe benefits $200,000

d. Taxable fringe benefits $300,000

12. Travel includes expenditures all have a valid business purpose.

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