Additional information is available for the preparation of the tax return for tax year 2018: Note payable is due in its entirety on June 30, 2020. Direct materials purchases for the year was $860,200. No beginning inventory. Dividend income is from M. Ditka Inc. L. Smith owns 15% of M. Ditka. Tax depreciation for equipment, a 5-year asset, is $9,740 and tax depreciation for furniture, a 7-year asset is $8,717 No beginning balances in retained earnings or earnings and profits since its a new corporation. The corporation did not compute a provision for income tax expense in its financial statements Requirements: 1. Prepare a federal tax return including supporting schedules for Luis using the tax forms, relevant amounts, and tax rates for tax year 2018. 2. Use the fill-in tax forms found at the IRS web site (www.irs.gov). You are not allowed to use a tax preparation software. 3. Make sure you include a separate page showing the income tax computation using the tax rate schedules for 2018. 4. Prepare a cover letter summarizing his return. 5. Submissions must be typed.

***TAX RATE IS A FLAT RATE OF 21% ***

L. Smith Co is in the business of selling electronics to consumers. L. Smith was incorporated March 10, 2018 had the following data available from its adjusted trial balance for its first year of operations, ended December 31, 2018. Debits Credits Cash 82,100 Accounts receivable 65,300 Inventory 10,200 Prepaid insurance 2,600 Equipment 48,700 Accumulated depreciation, equipment 4,870 Furniture 61,000 Accumulated depreciation, furniture 4,692 Wages payable 1,500 Accounts payable 29,400 Note payable 51,200 Common Stock 49,300 Additional Paid In Capital 8,500 Dividends 26,700 Sales revenue 1,340,000 Sales returns and allowances 6.200 Interest income from Illinois state 1,500 bonds Dividend income 45,000 Cost of goods sold 850,000 Wage and salaries expense - Officers 78,000 Wage and salaries expense - Other 250,000 Depreciation expense 9,562 Insurance expense 3,500 Business meals 5,400 Business entertainment 1,200 Rent expense 15,900 Fines and fees 1,100 Supplies expense 1,900 Interest expense 1,200 Charitable contributions 15,400 Additional information is available for the preparation of the tax return for tax year 2018: L. Smith Co is in the business of selling electronics to consumers. L. Smith was incorporated March 10, 2018 had the following data available from its adjusted trial balance for its first year of operations, ended December 31, 2018. Debits Credits Cash 82,100 Accounts receivable 65,300 Inventory 10,200 Prepaid insurance 2,600 Equipment 48,700 Accumulated depreciation, equipment 4,870 Furniture 61,000 Accumulated depreciation, furniture 4,692 Wages payable 1,500 Accounts payable 29,400 Note payable 51,200 Common Stock 49,300 Additional Paid In Capital 8,500 Dividends 26,700 Sales revenue 1,340,000 Sales returns and allowances 6.200 Interest income from Illinois state 1,500 bonds Dividend income 45,000 Cost of goods sold 850,000 Wage and salaries expense - Officers 78,000 Wage and salaries expense - Other 250,000 Depreciation expense 9,562 Insurance expense 3,500 Business meals 5,400 Business entertainment 1,200 Rent expense 15,900 Fines and fees 1,100 Supplies expense 1,900 Interest expense 1,200 Charitable contributions 15,400 Additional information is available for the preparation of the tax return for tax year 2018