Question Details

(solution) Scuba View, Inc. Federal Tax Return Facts Scuba View, Inc. is


Please go over with the attached documents and let me know. The requirement is in the attachments. Thanks!


Scuba View, Inc.

 

Federal Tax Return

 

Facts

 

Scuba View, Inc. is owned by Marc C. Fisher and his wife, Sylvia A. Fisher. The corporation

 

manufactures snorkel masks with built-in lighting systems used for general underwater lighting. When

 

cut on a special way, the lights flash rapidly indicating an emergency situation (business activity code

 

number 339900). The corporation has reported positive financial and taxable incomes since inception.

 

The company is located at 150 Reef Road, Big Sur, California 93920. The company?s employer

 

identification number is 98-7654321, and the calendar year is used for tax purposes. The date of

 

incorporation was March 14, 2010.

 

Marc C. Fisher (social security number 111-11-1111) is an 80 percent shareholder and president of the

 

company. Sylvia A. Fisher (social security number 123-45-6789) is a 20 percent shareholder and vice

 

president of the company. Both persons devote 100 percent of their time to the corporation. Marc?s

 

compensation is $153,695 per year, and Sylvia?s compensation is $85,387 per year.

 

The corporation is not a personal holding company. While the corporation is a ?closely held C

 

corporation,? it does not engage in activities to which the at-risk or passive activity loss limitations apply.

 

The corporation files its tax return on the accrual method. Inventory has been consistently valued at cost

 

under the FIFO method using the full absorption procedure. Inventory capitalization rules of Internal

 

Revenue Code Section 263A do not apply due to the ?small business exception? (average annual gross

 

receipts for the three preceding taxable years do not exceed $10 million). The accounting records are

 

computerized. 1 The corporation?s audited income statement and balance sheet for the current year, prepared by

 

the accounting firm of Coral & Coral, CPAs, follow:

 

SCUBA VIEW, INC.

 

INCOME STATEMENT

 

For the Year Ending December 31, Current Tax Year

 

Revenue:

 

Sales (net) ??????????????

 

Cost of goods sold ??????????? $6,859,819

 

(5,715,258) Gross profit ?????????????????? $1,144,561 Operating expenses:

 

Compensation of officers ????????.

 

Other salaries and wages ?????..............

 

Rental expense ????????????.

 

Interest expense ????????????

 

Fines for improper disposal of waste ????

 

Advertising ??????????????

 

Contributions ?????????????

 

Bad debt expense ???????????..

 

Depreciation expense ??????????

 

Taxes ????????????????.

 

Repairs and maintenance ????????..

 

Miscellaneous expenses ????????? $ 239,082

 

525,921

 

36,033

 

91,165

 

2,903

 

9,187

 

38,425

 

3,416

 

117,755

 

82,825

 

7,696

 

20,794 Total operating expenses ?????????????

 

Net Income from Operations ???????????.. $(1,175,202)

 

$ (30,641) Other income and loss:

 

Dividend income ???????????..

 

Interest income ????????????.

 

Loss on sale of investment in stock ????. $ 114,150

 

2,497

 

(2,731) Net Income (Loss) before income tax ???????? 113,916

 

$ Income tax expense ??????????????????

 

Net Income ??????????????????. 2 83,275

 

(3,414) $ 79,861 SCUBA VIEW, INC

 

STATEMENT OF FINANCIAL POSITION

 

December 31, Current Tax Year

 

Beginning

 

of Year ASSETS End

 

of Year Current Assets:

 

Cash & Marketable Securities ?????. $ 502,356

 

Accounts receivable ????????? 242,582

 

Allowance for Doubtful Accounts ???

 

(15,370)

 

Inventory ?????????????. 555,830

 

Total current assets ????????? $1,285,398 $ 487,595

 

273,727

 

(16,864)

 

672,888

 

$1,417,346 Machinery, Building, and Land:

 

Machinery ????????????... $ 333,006

 

Less: Accumulated depreciation ???... (102,464)

 

Building ?????????????.. 1,174,799

 

Less: Accumulated depreciation ???..

 

(141,253)

 

Land ???????????????

 

85,386

 

Total equipment, building, and land (net) $1,349,474 $ 380,397

 

(186,655)

 

1,174,799

 

(174,816)

 

85,386

 

$1,279,111 Other assets:

 

Goodwill ?????????????.

 

-0Total Assets ???????????.. $2,634,872 24,977

 

$2,721,434 LIABILITIES AND SHAREHOLDERS? EQUITY

 

Current liabilities:

 

Accounts payable ??????????

 

Notes payable (less than one year) ???.

 

Total current liabilities ???????.

 

Notes payable (one year or more) ??????..

 

Total Liabilities ??????????..

 

Common stock (20,000 shares authorized, 10,780

 

shares issued and outstanding, $10 par) ?.

 

Additional paid-in capital ??????????

 

Retained earnings ?????????????

 

Total Shareholders? Equity ??????.

 

Total Liabilities and Shareholders? Equity $ 218,930

 

175,895

 

$ 394,825

 

828,247

 

$1,223,072 $ 235,556

 

155,402

 

$ 390,958

 

890,899

 

$1,281,857 $ 107,800

 

916,836

 

387,164

 

$1,411,800

 

$2,634,872 $ 107,800

 

916,836

 

414,941

 

$1,439,577

 

$2,721,434 STATEMENT OF RETAINED EARNINGS

 

Beginning Retained Earnings ????????

 

$387,164

 

Net income for the year ??????????..

 

79,861

 

Dividends paid in cash ???????????

 

(52,084)

 

Ending Retained Earnings ?????????..

 

$414,941

 

3 NOTES

 

1. Scuba View, Inc. made estimated tax payments attributable to the current tax year in the

 

amount of $5,123. The corporation also had a credit from an overpayment of its prior

 

year Federal income taxes of $462 that it elected to apply against its current year tax

 

liability.

 

2. All notes payable were issued at par and provide market interest rates.

 

3. Ignore state income taxes.

 

4. Dividend income is from the following sources:

 

Apple Corp. (< 20% interest)????????????????

 

$67,188

 

Yahoo Corp. (< 20% interest)?????????????????... 25,616

 

Plexiglas, Inc. (Scuba View, Inc. owns 85% of Plexiglas?s stock) ?

 

21,346

 

Total ??????????????????????

 

$114,150

 

5. An analysis of the Allowance for Doubtful Accounts reveals:

 

Balance, January 1st...???????????????????? $15,370

 

Transactions:

 

Provision for bad debts ??????????????????

 

3,416

 

Recoveries of bad debts ?????????????????..

 

(726)

 

Accounts written off as uncollectible ????????????.

 

(1,196)

 

Balance, December 31st ????????????????... $16,864

 

6. Goodwill of $24,977 arose on purchase of another business on January 1st of the current

 

tax year. Amortization is not being taken for financial purposes.

 

7. Assume that deductions for tax depreciation (i.e., Modified Accelerated Cost Recovery)

 

for the year total $139,486. For this practice set do not complete Form 4562

 

(Depreciation and Amortization).

 

8. Meals and entertainment costs of $1,707 included in Miscellaneous Expenses are subject

 

to the 50% disallowance rule.

 

9. Contributions included:

 

Sierra Club ??????????????????????..

 

Government of Ethiopia ?????????????????.

 

Big Sur Food Bank ???????????????????.

 

Total ?????????????????????... $32,959

 

3,759

 

1,707

 

$38,425 All contributions were paid in cash during the year except for the Food Bank contribution

 

which was pledged by the corporation (i.e., approved by the Board of Directors) on

 

December 17th of the current tax year and paid on May 2nd the following year. 4 10. Included in interest income is $1,410 from $32,343 of Sacramento, California General

 

Obligation Bonds held throughout the current year. These bonds are included in the

 

marketable securities account.

 

11. On May 19th of the current tax year the corporation sold 100 shares of Plastic Corp.

 

common stock for $9,393. The stock was purchased on July 23rd, 2012 for $12,124.

 

12. Plexiglas, Inc. is a subsidiary of Scuba View Inc., formed in 2013, and operated in Lucia,

 

California for the purpose of manufacturing specialized Plexiglas panes used in the

 

making of snorkel masks. Historically Plexiglas, Inc. has been profitable and had a

 

taxable income of $87,366 and an Alternative Minimum Taxable Income [Form 4626, Ln.

 

7] of $87,937. Scuba View, Inc. and Plexiglas, Inc. have agreed to share equally any

 

limitations on item(s) that the income tax law restricts across the corporations so long as

 

the equal allocation results in utilization of maximum benefits available. However, if a

 

corporation does not have sufficient investment, income, or tax liability to realize the

 

benefit of the additional limitation. Sales by Plexiglas, Inc. to Scuba View, Inc. are at

 

?arms-length? prices (i.e., fair market values). Scuba View, Inc. has not elected to file a

 

consolidated income tax return with Plexiglas, Inc. Plexiglas, Inc. (EIN 12-3456789) is

 

located at 48 Coastal Highway, Lucia, California 93920.

 

13. Form 4626 (Alternative Minimum Tax?Corporations) must be included in the return.

 

For that purpose, assume the adjustment for depreciation of tangible property placed in

 

service after 1986 (Form 4626, Line 2a) is a $25,479 positive adjustment. Assume the

 

Adjusted Current Earnings (ACE) Adjustment on Line 4e is $-0-. [This assumption

 

removes ACE adjustment from this practice set].

 

14. Disregard any penalty on underpayment of estimated tax.

 

15. Assume that compensation of officers and other salaries and wages do not relate to

 

production activities. This assumption removes the Domestic Production Activities

 

deduction from this practice set.

 

REQUIRED

 

1. BOOK TO TAX RECONCILIATION WORKSHEET

 

Using the Income Statement provided above create a spreadsheet to reconcile income for

 

financial reporting purposes (book income) to taxable income. The first column label P/L

 

Books. The next two columns label as Adjustments, one for Temporary and one for

 

Permanent adjustments. The fourth column label P/L Tax. The fifth column label reference

 

and use it to indicate the source (notes 1-15) for the adjustment. The last column label M-1

 

and indicate Yes or No indicating whether or not to report item on the M-1.

 

2. TAX RETURN 5 From the above information, prepare Scuba View, Inc.?s Federal income tax return,

 

including all supporting statements, schedules, and forms. Unless otherwise noted,

 

assume Scuba View, Inc. follows the policies of making all elections to minimize its

 

current income taxes and, to the extent possible, of confirming procedures for financial

 

and tax accounting. Round amounts to the nearest dollar. If additional information is

 

needed, make realistic assumptions and fill in all required data. Forms needed:

 

Form 1120

 

Schedule O

 

Form 4626

 

Form 1125-A

 

Schedule G

 

Form 1125-E

 

Supporting schedule for 1120 line 26 other deductions

 

Supporting Schedule for Schedule M-1 line 5 expenses

 

CHECK FIGURES

 

1120 page 1 line 30 Taxable Income $22,305

 

1120 Schedule M-1 line 10 Income $95,695

 

GRADING

 

This tax return is worth 150 points. Each form is worth a set number of points as indicated

 

below. Total points earned per form is divided by the total points available for all forms (250)

 

and then multiplied by 150 points to arrive at the grade for this assignment.

 

Form

 

1120 page 1

 

1120 page 2

 

1120 page 3

 

1120 page 4

 

1120 page 5

 

Schedule O page 1

 

Schedule O page 2

 

Schedule O page 3

 

Schedule O page 4

 

Form 4626

 

Form 1125-A

 

Schedule G

 

Form 1125-E

 

Support for line 26

 

M-1 line 5 support

 

Book to Tax Reconciliation

 

Total Points Points

 

31

 

7

 

17

 

16

 

56

 

6

 

18

 

14

 

5

 

13

 

8

 

10

 

14

 

6

 

7

 

22

 

250 6

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Jan 30, 2021

PRICE: $15

Solution~0001016728.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Jan 30, 2021

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.

Order Now