Answer:
M-1 reconciliation for MDC Corporation
Net income per books (after tax) $500,000
Add: Item that decreased net income
but did not affect taxable income
Federal income tax per books $150,000
Excess of capital losses over capital gains $100,000
Marketing expense $80,000
Entertainment expense $68,000
Book (GAAP) depreciation in excess $150,000 $548,000
of tax (MACRS) deprecation
Less: Items that increased net income per
books but did not affect taxable income
Dividend income $150,000
Tax-exempt interest $9,000 $159,000
Taxable Income $889,000
