Problem C: 3-65:

Problem C: 3-65: Permtemp Corporation formed in 2008 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:Sales $20,000,000Cost of goods sold) (15,000,000)Gross profit $ 5,000,000Dividend income 50,000Tax-exempt interest income 15,000Total income $ 5,065,000Expenses:Depreciation $ 800,000Bad debts 400,000Charitable contributions 100,000Interest 475,000Meals and entertainment 45,000Other 3,855,000Total expenses) 5,675,000Net loss before federal income taxes $ (610,000)Cash $ 500,000Accounts receivable $ 2,000,000Allowance for doubtful accounts) (250,000) 1,750,000Inventory 4,000,000Fixed assets $10,000,000Accumulated depreciation) (800,000) 9,200,000Investment in corporate stock 1,000,000Investment in tax-exempt bonds 50,000Total assets $16,500,000Accounts payable $2,610,000Long-term debt 8,500,000Common stock 6,000,000Retained earnings) (610,000)Total liabilities and equity $16,500,000Additional information for 2008:The investment in corporate stock is comprised of less-than-20%-owned corporations.Depreciation for tax purposes is $1.4 million under MACRS.Bad debt expense for tax purposes is $150,000 under the direct writeoff method.Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary.Qualified production activities income is zero.Required for 2008:a. Prepare page 1 of the 2008 Form 1120, computing the corporations NOL.