Prpare a 2015 Form 1120 US corporation Income Tax Return

Information:

1) Freddy Falcon Inc's business address is 2100 W University Ave, Wichita, KS 67213.

2) Its employer identification number is 41-2955236.

3) Freddy Falcon Inc. was incorporated on January 1, 2013.

4)

5) Freddy Falcon Inc. placed the following assets in service on the date indicated:

A.

B.

C.

6) Freddy Falcon uses the accrual method of accounting and reports on a calendar year basis.

7)

8) Freddy Falcon uses the Cost Method for valuing Closing Inventory and uses the FIFO inventory method.

9)

10)

This project is due on or before the beginning of class on Monday, November 28, 2016. No late returns will be

accepted. There are no exceptions.

On January 1, 2013, Freddy Falcon formed Freddy Falcon, Inc. to manufacture and sell birds' nests and related

supplies. Pertinent information regarding Freddy Falcon is summarized as follows:

Freddy owns 100 percent of the outstanding common stock; no other class of stock is authorized. Freddy is

the president of the company and received a salary of $50,000 in 2015, which is not considered in the

calculation of COGS. His Social Security number is 123-45-6789.

Land and Building: Purchased land and a building (Nonresidential Real Property) for $200,000 on January

1, 2013. The land and building were placed in service on January 1, 2013. $160,000 of the purchase price

was allocated to the building, and $40,000 to the land. Freddy Falcon depreciates the building on a straight-

line basis over 40 years for financial accounting purposes (salvage value = $0)

Equipment 1: Purchased equipment (7-year MACRS property - Half Year Convention) on January 1, 2014

for $20,000. The equipment was placed in service on January 1, 2014. Freddy Falcon depreciates the

equipment on a straight-line basis over 10 years for financial accounting purposes (salvage value = $0).

Freddy Falcon uses regular MACRS depreciation for tax purposes. He did not make a section 179 election

and elected out of bonus depreciation. Freddy Falcon sold this equipment for $22,000 on December 31,

2015.

Prepare a 2015 Form 1120 - U.S. Corporation Income Tax Return - for Freddy Falcon Inc. based on the

information provided:

Prepare the return as if you were preparing it for an actual client. All necessary forms and schedules should be

attached to the return, and properly and neatly completed. Form 1120 (Pages 1 – 5), Schedule D, Form 4562,

Form 4797, and Form 8903 are among the forms that are required. The details of all required information (e.g.,

other deductions) must be provided in attached schedules.

Net income per books (before federal income tax) is $59,500. Freddy Falcon made estimated tax payments of

$8,000 ($2,000 per quarter) to the IRS for the calendar year. This amount is sufficient to avoid any potential

penalty for underpayment of estimated tax. Freddy Falcon wants any overpayment of federal taxes (if there is

any) to be credited to 2016 estimated tax.

Freddy Falcon qualifies for the domestic production activities deduction (DPAD). Assume that all business

related income and expense items are part of qualified production activities income = $43,500.

On October 1, 2015, Freddy Falcon Inc. declared and paid a $5,000 cash dividend to its shareholder, Freddy

Falcon.

Equipment 2: Purchased equipment (7-year MACRS property - Half Year Convention) for $10,000 on

January 1, 2015. The equipment was placed in service on January 1, 2015. Freddy Falcon depreciates the

equipment on a straight-line basis over 10 years for financial accounting purposes (salvage value = $0). He

did not make a section 179 election and elected out of bonus depreciation.

Freddy Falcon Inc's Book Income Statement for its year ended December 31, 2015:

Sales 200,000

Returns (25,000)

Net Sales 175,000

Less: Cost of Goods Sold (45,000)

Gross Profit 130,000

Expenses:

Depreciation 7,000

Repairs and Maintenance 5,000

General Insurance 4,500

Employee Compensation 50,000

Utilities 6,000

Advertising 1,500

Legal and Accounting Fees 500

Charitable Contributions 5,500

Interest Expense 6,500

Total Expenses 86,500

Gain on Sale of Equipment 6,000

Dividend Income (10% owned Corp.) 10,000

Net Income before Income Taxes 59,500

Federal Income Tax Expense 7,000

Net Income 52,500

Freddy Falcon Inc's Book Balance Sheet:

Cash 45,000 50,000

Accounts Receivable 35,000 25,000

Inventory 20,000 35,000

Buildings and Equipment 180,000 170,000

Less: Accum. Depreciation (10,000) 170,000 (13,000) 157,000

Land 40,000 40,000

Total Assets 310,000 307,000

Accounts Payable 35,000 37,500

Notes Payable (30 yr Note) 100,000 97,000

Common Stock 100,000 50,000

Retained Earnings 75,000 122,500

Total Liabilities and Shareholders' Equity 310,000 307,000

as of 12/31/2014 as of 12/31/2015

Freddy Falcon, Inc.

FEIN: 41-2955236

Form 1120 - Tax Year 2015

Attachment for Form 4562, Line 17:

Description of Property: Building

Acquisition Date: 1/1/2013

Basis for Depreciation: 160,000$

Recovery Period: 39 yrs

Convention: MM

Method: S/L

Depreciation Rate: 2.564

Depreciation Deduction: 4,102$

Description of Property: Equipment 1

Acquisition Date: 1/1/2014

Basis for Depreciation: 20,000$

Recovery Period: 7 yrs

Convention: HY

Method: 200 DB

Depreciation Rate: 24.49

Depreciation Deduction: 4,898$

Total Depreciation 9,000$ to Form 4562,

Line 17