Homework SourseHow do you prepare the Schedule M1 and M2SolutionSchedule M
How do you prepare the Schedule M1 and M2?
Solution
Schedule M: Schedule M1 of the form 1120 is the link for reconcilliation between financial accounting and tax reporting. Schedule M1 is prepared as follows:
ITEMS--PLUS
Book Income (Starting Point)
Federal Income Tax
Net Capital Loss
Taxable Income not on the Books
Taxable Income (Ending Point)
ITEMS-MINUS
Book Income not on Tax Return
Expenses for Tax not in the Books
Book Expenses not on Tax Return
SCHEDULE M2
It is an analysis of unappropriated retained earnings per books. Schedule is prepared as per following steps:
Determine balance at the beginning of the year for Line 1 and net income (loss) per books for Line 2 of Schedule M-2.
Itemize any increase in line 3
2.
