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let's explore this problem it asks us to determine taxable income and we have to use schedule m1 from a form 1120 okay the following information is for the 2014 Sparrow corporation results and Sparrow corporation is a calendar year accrual-based taxpayer so here's what we know to the left of my mouse there you can see the net income for books is a hundred and seventy four thousand one hundred dollars the federal income tax expense for the books is eighty six thousand six hundred tax-exempt interest it's four thousand five hundred and makers depreciation and excess of straight-line depreciation used for financial statement purposes with seven thousand two hundred dollars now the excess of capital loss over capital gains was nine thousand four hundred there was a non-deductible meals and entertainment amount of five thousand five hundred that we see on sparrows books and interest on a loan to purchase tax-exempt bonds was eleven hundred dollars now based on that information were to use s

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