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[1] Create an Excel spreadsheet using the info that follows to compute the taxpayers [a] book income, [b] taxable income, and [c] book/tax differences. Format

[1] Create an Excel spreadsheet using the info that follows to compute the taxpayers [a] book income, [b] taxable income, and [c] book/tax differences.

  • Format your spreadsheet to print on a single page in a font large enough for easy reading.
  • Attach your spreadsheet to the back of the tax forms required in step [2].

[2] Using the Excel spreadsheet completed above, prepare a 2020 Form 1120 [p.1 thru line 37] and Schedule M-1 [p.6]. Find Form 1120 at www.irs.gov.

  • You can complete these forms by hand as long as your handwriting is legible. Unreadable project solutions will not be graded and will receive a score of zero.
  • Do not attach other forms as required by certain lines of Form 1120.

[3] Submit your solution in class.

  • Include your name in the upper right-hand corner of the first page of your solution.
  • Staple your solution. Unstapled project solutions will not be graded and will receive a score of zero.
  • Do not include a coversheet.
  • As noted in the syllabus, a late penalty of 15% of the total possible points will be imposed for each 24 hours or portion thereof that a project is turned in after the submission deadline.

Taxpayer Information:

Acme, Inc. is an accrual-basis, calendar-year wholesaler.

  • Acme was incorporated on January 4, 2019.
  • Acmes employer identification number is 31-1584392.
  • Acmes main office is located at 51515 Sycamore Road, DeKalb, IL 60115.
  • Acme has total assets as of December 31, 2020 of $6,870,900.

  • Acmes GAAP income statement for the year reported the following:
    • $2,998,000 of total sales for the year. Returns and allowances of $82,000 were subsequently granted to customers who received goods that was damaged.
    • $20,700 of interest income was received during the year. Of this total, $5,800 was earned on City of DeKalb bonds.
    • $32,000 of prepaid rent was received in late December 2020 from a company that will lease excess space in its largest warehouse from February 1 through October 31, 2021.
    • $57,000 of dividends received from a domestic corporation in which Acme owns 5% of the outstanding stock.
    • ($8,700) loss on the sale of investment securities.

  • Acmes GAAP income statement for the year also reported the following:
    • Cost of Goods Sold $1,132,700
    • Salaries (including Officers Compensation of $180,000) 690,000
    • Federal income tax expense 167,800
    • Depreciation expense 118,400
    • State & Local Taxes 43,500
    • Interest Expense 7,000
    • Repairs 12,000
    • Rent expense 37,200
    • Advertising expense 25,000
    • Bad debts 30,800
    • Property/Casualty Insurance Premiums 12,000
    • Business Meals from restaurants 9,400
    • Business Meals not from restaurants 4,200

Additional information is as follows:

  • Depreciation for tax purposes totaled $197,700.
  • Acme wrote off $38,400 of accounts receivable as uncollectible this year.
  • Acmes loss on the sale of investment securities is considered a capital loss for tax purposes.
  • During its first year of operations, Acme generated a $67,000 net operating loss.
  • Acme made the following estimated income tax payments to the IRS for 2020:
    • Overpayment in 2019, credited to 2020 $43,000
    • 2nd quarter 35,000
    • 3rd quarter 35,000
    • 4th quarter 35,000
  • Acme does not qualify for any other tax credits in 2020.
  • Any overpayment of 2020 tax should be credited to its 2021 estimated taxes.

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