ACC432A SIGNATURE PROBLEM TAX PROBLEM Using the information provided below complete a Form 1040 and all supporting Schedules and Forms to complete a 2011 tax return for John and Ellen Brite. John and Ellen Brite (SSN 265-32-1497 and 571-07-7345, respectively) are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail store, Brite-On. Brite-On had the following assets on January 2, 2011: Assets Cost Old store building purchased April 1, 2000 $100,000 Equipment (7-year recovery) purchased January 10, 2006 30,000 Inventory valued using FIFO method: 4,000 light bulbs $5/bulb Brite-On purchased a competitors store on March 1, 2011 for $107,000. The purchase price included the following: New store building $60,000 (FMV) Land 18,000 (FMV) Equipment (5-year recovery) 11,000 (FMV) Inventory: 3,000 light bulbs $6/bulb (cost) On June 30, 2011, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a $30,500 car for $500/month beginning on January 1, 2011. The car is used 100% for business and was driven 14,000 miles during the year. Brite-On sold 8,000 light bulbs at a price of $15/bulb during the year. Also, Brite-On made additional purchases of 4,000 light bulbs in August 2011 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the light bulbs) and additional expenses: Service revenues $64,000 Interest expense on business loans 4,000 Auto expenses (gas, oil, etc) 3,800 Taxes and licenses 3,000 Utilities 2,800 Salaries 24,000 John and Ellen also had some personal expenses: Medical bills $ 4,500 Real property taxes 3,800 Home mortgage interest 9,000 Charitable contributions (cash) 600 The Brites received interest income on a bank savings account of $275, John and Ellen made four $5,000 quarterly estimated tax payments. For self employment tax purpose, assume John spent 100% of his time at the store while Ellen spend no time at the store. Additional Facts: 1) Equipment acquired in 2006: The Brites elected out of bonus depreciation and did not elect Sec. 179. 2) Equipment acquired in 2011: The Brites elect Sec. 179 to expense the cost of the 5-year equipment but elected out of bonus depreciation. 3) Lease inclusion rules required that Brite-On reduce its deductible lease expense by $30