Heron Corporation, a Calendar Year, Accrual Basis Taxpayer, Provides the Following

Essay

Heron Corporation, a calendar year, accrual basis taxpayer, provides the following information for the current year and asks you to prepare Schedule M-1.
Net income per books (after-tax) $258,050
Taxable income 195,000
Federal income tax liability 40,950
Interest income from tax-exempt bonds 5,000
Interest paid on loan incurred to purchase tax-exempt bonds 2,000
Life insurance proceeds received as a result of death of Heron's president
100,000
Premiums paid on policy on life of Heron's president 4,500
Excess of capital losses over capital gains 2,000
Retained earnings at beginning of year 375,000
Cash dividends paid 90,000
Tax depreciation in excess of book depreciation 7,500