prof Double R
IntimidationTThe owners of The Car Wash have asked you to prepare their tax return. Their financial statements are audited by a local certified public accounting (CPA) firm, and they have provided them to you as a reference. A copy of the Income Statement and Balance Sheet have been reproduced below. In your discussion, you obtained the following pieces of additional information to prepare the tax return:
- Name of business owner: Tim Smith, SSN:123-45-6789
- Tim Smith’s address: 8765 Warner Street, Huntington Beach, CA 92605
- Name of business owner: Jack Dillard, SSN: 987-65-4321
- Jack Dillard’s address: 4321 Courtyard Place, Huntington Beach, CA 92605
- Business name: The Car Wash
- Business address: 1046 Broadway Street, Huntington Beach, CA 92605
- Business description: Self-Service Car Wash
- Employer identification number: 99-8877665
- Date the business started: January 1, 2008
- Business will file its return using the cash basis of accounting
Income Statement
December 31, 20XX
Revenue: | |
Service revenue | $254,603 |
Expenses: | |
Advertising | 2,520 |
Depreciation | 31,250 |
Insurance | 7,260 |
Interest expense | 36,204 |
Licenses and fees | 7,260 |
Miscellaneous | 4,074 |
Office expense | 8,911 |
Salaries and wages | 67,460 |
Payroll taxes | 9,444 |
Employee benefits | 1,349 |
Professional fees | 1,210 |
Repairs and maintenance | 20,674 |
Telephone | 900 |
Travel | 1,500 |
Utilities | 27,752 |
Net income before taxes | $26,835 |
Balance Sheet
January 1, 20XX | December 31, 20XX | |
Assets | ||
Cash | $28,638 | $64,979 |
Buildings and other depreciable assets | 555,000 | 555,000 |
Accumulated depreciation | (62,500) | (93,750) |
Total assets | 521,138 | 526,229 |
Liabilities and equity | ||
Loans | 183,757 | 167,962 |
Mortgage | 233,229 | 227,280 |
Equity investment | 160,000 | 160,000 |
Retained earnings | (55,848) | (29,013) |
Total liabilities and equity | $521,138 |
$526,229 |
Part I
- Adjust and make any changed to your IP4 tax returns based on faculty feedback. Include your finished and fully edited version for Part 1.
Part II
Deliverable Length: 800–1,100 words
Your client has been informed that an S corporation is a popular business form and wants to know more about it. Please write a professional memo to your client responding to his inquiry. Be sure to at least discuss the following items:
- What is an S corporation?
- When is it advisable to be taxed as an S corporation?
- How does an organization become an S corporation?
- If The Car Wash is a corporation, can they be taxed as an S corporation?
- Why or why not?
- What criteria must be met?
- If The Car Wash is a LLC, can it be taxed as an S corporation?
- If so, what does it need to do to elect S corporation status?
- How would The Car Wash report and pay tax if it is an S corporation?
9 years ago
40
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form_1120_completely_filled.pdf- form_1065_completed.pdf
- s_corporation.docx
