Using the categories in the following legend, classify each transaction as a plu

Question

Using the categories in the following legend, classify each transaction as a plus (+) or minus (?) on Schedule M–2 of Form 1120S. An answer might look like one of these: +AAA or -OAA.

Legend

AAA = Accumulated adjustments account

OAA = Other adjustments account

NA = No direct effect on Schedule M–2

a. Receipt of tax-exempt interest income.

b. Unreasonable compensation determined.

c. Depreciation recapture income.

d. Nontaxable life insurance proceeds.

e. Expenses related to tax-exempt securities.

f. Charitable contributions.

g. Business gifts in excess of $25.

h. Nondeductible fines and penalties.

i. Administrative expenses.

Explanation / Answer

a. Receipt of tax-exempt interest income. - +OAA

b. Unreasonable compensation determined. - -AAA

c. Depreciation recapture income. - +AAA

d. Nontaxable life insurance proceeds. - +OAA

e. Expenses related to tax-exempt securities. - -OAA

f. Charitable contributions. - -AAA

g. Business gifts in excess of $25. - -AAA

h. Nondeductible fines and penalties. - -AAA

i. Administrative expenses. - -AAA

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