THIS QUESTION WAS ANSWERED BEFORE HOWEVER IT ISINCORRECT. THERE WAS NO 1125a FORM THAT WOULD REDUCE THE COGS. THEUS TREASURY INTEREST INCOME IS NOT SHOWN, OFFICERS INSURANCE IS NOTON M1
Portfolio Project: Trust and Estates – Part 1(175 Points)
For this assignment, you will complete two tax returns(Corporation Return and Partnership Return), for 175 points each.You may use the tax software found athttp://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-thirdof the common stock of Tasty Treats and Beverages. The corporationwas incorporated on April 3, 2004. It has only one class of stockoutstanding and operates as a C corporation for tax purposes. TastyTreats 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 codeis 722300.
The shareholders also work as officers for the corporation asfollows:
Jane is the chief executive officer and president (SocialSecurity number 242-62-5786).
James is the executive vice president and chief operatingofficer (Social Security number 563-58-8923).
Steve is the vice president of finance (Social Security number575-58-1572).
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 calendaryear-end.
Four equal estimated tax payments of $28,000 each quarter. Itstax liability last year was $85,000.
If it has overpaid its federal tax liability, the corporationwould like to receive a refund.
Dividend paid of $20,000 to its shareholders on October 1. TheCorporation had ample earnings and profits (E&P) to absorb thedistribution.
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 valuesits inventory based on cost using the FIFO inventory cost flowmethod. Assume the rules of §263A do not apply.
Of the $12,000 interest income, $1,500 was from a City of Deesbond 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 theremaining $6,250 was from a money market account.
Dividend income came from ABC Inc. Owned 10,000 shares of thestock in ABC Inc. at the beginning of the year. This represented 10percent of outstanding stock.
On September 1, 2013, the corporation sold 1,000 shares of itsABC stock for $15,000. It had originally purchased these shares onJune 13, 2006, for $7,500. After the sale, the Corporation owned 9percent 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 asuncollectible during the year.
Regular tax depreciation was $28,000. None of the depreciationshould 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 lifeinsurance policies for which Tasty Treats and Beverages, Inc. isthe beneficiary. The policies cover the lives of Jane, James, andSteve.
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