Corporate Tax
paulneerce8fxFor this assignment, you will complete two tax returns (Corporation Return and Partnership Return), for 175 points each. You may use the tax software found at http://accountants.intuit.com/tax/proseries/
Please note there is a limit of 5 returns per session.
PART I – Tax Return #1, Corporate Return
Background
Jane Collier, James Taye, and Steve Allwine each own one-third of the common stock of Tasty Treats and Beverages. The corporation was incorporated on April 3, 2004. It has only one class of stock outstanding and operates as a C corporation for tax purposes. Tasty Treats and Beverages caters kid-friendly social events.
- Located at 1215 Blue Horizon, Dallas, TX 12234.
- Employer Identification Number is 12-34567890.
- Business activity is catering food. Its business activity code is 722300.
- The shareholders also work as officers for the corporation as follows:
- Jane is the chief executive officer and president (Social Security number 242-62-5786).
- James is the executive vice president and chief operating officer (Social Security number 563-58-8923).
- Steve is the vice president of finance (Social Security number 575-58-1572).
- All officers devote 100% of their time to the business
- All officers are U.S. citizens.
- Use the accrual method of accounting and have a calendar year-end.
- Four equal estimated tax payments of $28,000 each quarter. Its tax liability last year was $85,000.
- If it has overpaid its federal tax liability, the corporation would like to receive a refund.
- Dividend paid of $20,000 to its shareholders on October 1. The Corporation had ample earnings and profits (E&P) to absorb the distribution.
Financial Statements
Tasty Treats and Beverages, Inc. | ||
Income Statement | ||
For year ended December 31, 2013 | ||
Revenue from sales | 1,500,000 | |
Sales returns and allowances | (25,000) | |
Cost of goods sold | (325,000) | |
Gross profit from operations | 1,150,000 | |
Other Income: | ||
Capital loss | (7,500) | |
Dividend income | 15,000 | |
Interest income | 12,000 | |
Gross income | 1,169,500 | |
Expenses: | ||
Compensation | (750,000) | |
Depreciation | (12,000) | |
Bad debt expense | (7,800) | |
Meals and entertainment | (3,000) | |
Maintenance | (2,500) | |
Property taxes | (10,000) | |
State income taxes | (30,000) | |
Other taxes | (11,000) | |
Rent | (28,000) | |
Interest | (7,300) | |
Advertising | (6,200) | |
Professional services | (5,000) | |
Employee benefits | (8,000) | |
Supplies | (2,500) | |
Other expenses | (1,750) | |
Total expenses | (885,050) | |
| ||
Income before taxes | 284,450 | |
Federal income tax expense | 96,713 | |
Net income after taxes | 187,737 |
Tasty Treats and Beverages, Inc. | ||||
Balance Sheet | ||||
December 31, 2013 | ||||
ASSETS | January 2013 | December 2013 | ||
Cash | 175,000 | 190,000 | ||
Accounts Receivable | 63,000 | 54,000 | ||
Allowance for doubtful accounts | (8,000) | (7,000) | ||
Inventory | 225,000 | 275,000 | ||
US government bonds | 30,000 | 25,000 | ||
State and local bonds | 50,000 | 50,000 | ||
Investments in stock | 325,000 | 335,000 | ||
Fixed assets | 475,000 | 485,000 | ||
Accumulated depreciation | (198,000) | (215,000) | ||
Other assets | 11,000 | 12,000 | ||
Total assets | 1,148,000 | 1,204,000 | ||
Liabilities and Stockholder's Equity | ||||
Accounts payable | 225,000 | 200,000 | ||
Other current liabilities | 135,000 | 55,000 | ||
Other liabilities | 75,000 | 68,263 | ||
Capital stock | 250,000 | 250,000 | ||
Retained earnings | 463,000 | 630,737 | ||
Total liabilities and stockholder's equity | 1,148,000 | 1,204,000 | ||
Additional Information
- Inventory-related purchases during 2013 were $175,000. It values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of §263A do not apply.
- Of the $12,000 interest income, $1,500 was from a City of Dees bond that was used to fund public activities (issued in 2011), $1,750 was from an Border city bond used to fund private activities (issued in 2004), $2,500 was from a U.S. Treasury bond, and the remaining $6,250 was from a money market account.
- Dividend income came from ABC Inc. Owned 10,000 shares of the stock in ABC Inc. at the beginning of the year. This represented 10 percent of outstanding stock.
- On September 1, 2013, the corporation sold 1,000 shares of its ABC stock for $15,000. It had originally purchased these shares on June 13, 2006, for $7,500. After the sale, the Corporation owned 9 percent of ABC.
- compensation is as follows:
- Jane $175,000
- James $150,000
- Steve $150,000
- Other $275,000
- The Corporation wrote off $10,000 in accounts receivable as uncollectible during the year.
- Regular tax depreciation was $28,000. None of the depreciation should be claimed on Form 1125A.
- The $7,300 interest expense was from a business loan.
- Other expenses include $3,000 for premiums paid on term life insurance policies for which Tasty Treats and Beverages, Inc. is the beneficiary. The policies cover the lives of Jane, James, and Steve.
- 7 years ago
- 20
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