CORPORATION
Note that this example is for tax year 2016 because the 2017 tax forms have not yet been released by the IRS.
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 is 79-7979797 and its business code is 445290. It was incorporated on July 15, 2007.
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-2016 purchases) 3,000
Section 179 expense (2/1/16 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, 2014; it had an adjusted basis of $3,000 when sold on August 15, 2016.
The Market also sold a display case for $1,000 on December 12, 2016, that had cost $12,000 when purchased on June 6, 2012; 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, 2016.
The corporation's beginning and ending accrual-basis balance sheets for 2016 are shown below:
January 1, 2016 December 31, 2016
Assets:
Cash $62,000 $49,753
Accounts Receivable 37,500 37,500
Inventory 340,000 340,000
Tax Refund 5,462
Plant, Property, and Equipment $80,000 $68,000
Less: Accumulated Depreciation 62,000 59,000
Total Assets $457,500 $441,715
Liabilities and Equities:
Accounts Payable $20,000
Deferred Tax Liability 0 $600
Note Payable 12,500 12,500
Common Stock 225,000 225,000
Retained Earnings 200,000 203,615
Total Liabilities and Equities $457,500 $441,715
Form 1120 and Related Forms and Schedules
Form 1120: U.S. Corporate Income Tax Return
Schedule D: Capital Gains and Losses
Schedule G: Information on Certain Persons Owning the Corporation's Voting Stock
Form 1125-A: Cost of Goods Sold
Form 4562: Depreciation and Amortization
Form 4797: Sales of Business Property
(Form 1125-E is not required as it duplicates information provided elsewhere.)