CORPORATE TAX RETURN PROBLEM
Facts
William Spicer (SS# 123-45-6789) owns 80 percent of the stock in Bill's Market, an accrual basis gourmet food market operating as a corporation. It is located at 387 Spring Street, Raleigh,?NC 29288. William's wife, June (SS# 987-65-4321), owns the other 20 percent of the outstanding stock of the corporation but she is not active in the business. The Market's EIN is79-7979797 and its business code is 445290. It was incorporated on July 15, 2006.
During the last tax year, the Market had the following results from its operations:
Gross sales ($1,300,000 from credit card sales) $2,700,000
Merchandise purchases 1,980,000
Expenses:?Advertising $40,000
Charitable contributions 2,000
Cleaning/maintenance 12,000
Depreciation (MACRS pre-2015 purchases) 3,000
1
Section 179 expense (2/1/13 display case) 5,000
Payroll taxes (excluding FICA on William's salary) 18,000
FICA on William's salary 10,247
William's salary 200,000
Health insurance 15,000*?Insurance (excludes health) 18,000
Interest expense 1,000
Licenses/fees 4,000
Meals/entertainment 1,000
Office expenses 14,000
Rent 120,000
Salary/wages 210,000
Travel 8,000
Utilities 16,000?*Includes $3,000 for health insurance for William and his family.
The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August 15, 2015.?The Market also sold a display case for $1,000 on December 12, 2015, that had cost $12,000 when purchased on June 6, 2011; it had an adjusted basis of $4,000 when sold. The gains or losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements.
Information specific to the corporate form: The corporation made estimated payments for its own taxes of $10,000 and withheld $45,000 from William's salary for income taxes. For financial accounting, the corporation does not expense the new display case but deducts $1,000 of depreciation expense. It has a beginning balance of $200,000 in its retained earnings account and made a $25,000 dividend distribution to its shareholders on December 31, 2015.
2.
The corporation's beginning and ending accrual-basis balance sheets for 2015 are shown below:
Jan. 1, 2015 Dec. 31, 2015
Assets:
Cash $62,000 $ 49,753
Acc Rec 37,500 37,500
Inventory 340,000340,000
Tax Refund 5,462
Plant, Prop&Equip$80,000 $68,000
Less: AccDeprec. 62,000 59,000
NET 18,000 9,000
Total Assets $457,500 $441,715
Liabilities and Equities:
Accounts Payable $20,000 0 0
Deferred Tax Liability 0 $600
Note Payable 12,50012,500
Common Stock 225,000225,000
Retained Earnings 200,000 203,615
Total Liab.&Equities $457,500 $441,715
Attachment:- Assignment File.rar