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Master Corporation 1

Master Corporation, an accrual- based calendar year taxpayer had a gross sales of $250000 in 2016. Of those sales, $2000 of goods were returned by their customers for various reasons.
Master corporation also agreed to give $500 in credits to customers for goods which were received ( but kept by customers) in less than pristine condition.

On August 4, Master Corporation sold a vacant factory to an unrelated party for $3000 which it had purchased on october 15,1990. The factory had an original cost of $1000 and over the years was given $750 in capital improvements. Accumulated depreciation (which was the same for books and tax) in the date of sale was 1,150. Broker and other expenses on the sale amounted to $200. The purchaser agreed to pay Master Corporation $1000 each in 2016, 2017,and 2018.

Required: Complete form 1120 lines 1(a), 1(b) and 1(c) and form 6252.

Master Corporation 2

Master Corporation values closing inventory at cost using FIFO and made no changes in accounting for inventory during 2016. You have calculated that Master Corporation had $6000 of Section 263(a) costs in 2016 and that $800 of these costs belongs in the ending inventory.

On the 2015 tax return , you see that the ending inventory on the balance sheet ( Schedule L ) was $40000 but on Schedule A ( Cost of Goods Sold) it was listed as $ 41200.

Required: Complete Schedule A of Form 1120 plus lines 2 and 3 of Form 1120, page 1.

In addition, Schedule M-1 would reconcile as follows;

Net income per books                                                                                        $225

Add: Expenses recorded on books this year not deducted:

263(A) costs included in December 31,2016 inventory                                     40

Less: Deductions in this return not charged against book income this year: 263(A) costs included in December 31,2015 inventory                                                                        (15)

Income per tax return                                                                                        $250

Master Corporation 3
During 2016, the Master Corporation received dividend income of $5000 from a corporation that is 10% owned. In addition, the corporation received a $10000 distribution from Minor Corporation , a non- consolidated subsidiary.
The Master Corporation reported the following interest income for the ended December 31, 2016:

State of New York Bonds $300

 

U.S. Treasury Notes

500

Certificate of Deposit

180

City of Albany Bonds

100

XYZ Corporation Bonds

350

 

$1430

The Master Corporation is a limited partner in XYZ partnership. Master Corporation received a Schedule K-1, " Partner's share of income, Credits, Deductions, ETC" for the partnership year ended December 31, 2016.

Requirements:
1. Complete Schedule C, Column (a) and line 4 of form 1120.
2. Complete lines 5 and 10 of Form 1120.

Master Corporation 4
Master Corporation sold the following assets in 2016 in addition to the factory mentioned in problem #1

 

Asset

Sales Price

Cost

Tax Depr.

Book Depr.

Purchased

Sold

Building

200,000

150,000

62,500

52,500

1/1/94

12/16

Equipment

100,000

500,000

450,000

425,000

1/1/97

12/16

Furniture

10,000

50,000

50,000

45,000

7/31/99

10/16

Requirement: Complete Schedule 4797. Carry the results to other parts parts of Form 1120 as required.

Master Corporation also recorded 2,000 in net short-term capital gains on its December 31,2016 income statement. The Corporation marks all of its investment to market for book purposes.

At December 31, 2016 Master has $500 of unrealized short-term gains. At December 31, 2015 Master had $150 of unrealized short-term losses.

Requirements: Complete Schedule D. Carry the results to other parts of Form 1120 as required.

Master Corporation Problem # 5
The Master Corporation lists the following expenses on its income statement for the year ended December 31, 2016:

 

Salaries ( including accrued bonuses)

$155,000

Repairs

2,000

Bad debt Expense

8,000

Federal Income Tax

35,000

New York State Income Tax

15,000

Officers Life Insurance

5,000

Federal Payroll Tax

4,300

Office Expense

5,000

Meals & Entertainment

7,000

Additional Information:
1. Master has two officers, John Jones ( who owns 30% of Master's common stock) earned
$30,000 and Mary Smith ( who owns 15% of Master's common Stock) earned $25000. Bonuses ( included in the salary expense above) to John and Mary were also accrued at December 31, 2014. John's bonus of $2000 was paid on April 1, 2016. Mary received half of her $2000 bonus on February 1, 2017 and the other half on April 1, 2017.

2. Master's Reserve for Bad Debts was $2000 and $1,800 on December 31, 2016 and 2015, respectively.

3. Master paid $5000 for an ultra- extravagant officer's party. This amount is included in Meals and Entertainment.

4. Beneficiary of the officer's life insurance is Master Corporation.

Requirement: Complete the applicable lines on Form 1120.

Master Corporation Problem #6
The Master Corporation's Fixed Asset Schedule for tax purposes is as follows:

 

Assets

Date Acquired

Method

Years

Cost

Leasehold Imp.

07/01/97

S/L

30

$1,000

Leasehold Imp.

07/01/97

MACRS

31.5

2,000

Furniture

01/01/14

MACRS

7

500

Technical Equip.

03/01/16

MACRS

5

1,000

Furniture

04/01/16

 

 

700

Computer

10/02/16

 

 

500

Taxation, Accounting

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