Bottle-Up, Inc., was organized on January 8, 2008, and made its Selection on January 24, 2008. The necessary consents to the election were filed in a timely manner. Its address is 1234 Hill Street, City, ST 33333. Bottle-Up uses the calendar year as its tax year, the accrual method of accounting, and the first-in, first-out (FIFO) inventory method. Bottle-Up manufactures ornamental glass bottles. It made no changes to its inventory costing methods this year. It uses the specific identification method for bad debts for book and tax purposes. Herman Hiebert and Melvin Jones own 500 shares each. Both individuals materially participate in Bottle-Ups single activity. Herman Hiebert is the tax matters person. Financial statements for Bottle-Up for the current year are shown in Tables C:11-2 through C:11-4. Ignore the U.S. (domestic) production activities deduction. Prepare a 2018 S corporation tax return for Bottle-Up, showing yourself as the paid preparer.

TABLE C:11-2 Bottle-Up, Inc. Income Statement for the Year Ended December 31 of the Current Year (Problem C:11- 61) Sales $2,500,000 Returns and allowances (15,000) Net sales $2,485,000 Beginning inventory $102,000 Purchases 900,000 Labor 200,000 Supplies 80,000 Utilities 100,000 Other manufacturing costs 188,000a Goods available for sale $1,570,000 Ending inventory (96,000) 1,474,000b Gross profit $1,011,000 Salaries $ 451,020c Utilities expense 54,000 Depreciation (MACRS depreciation is $36,311) 11,782 Automobile and truck expense 26,000 Office supplies expense 9,602 Advertising expense 105,000 Bad debts expense 620 Rent expense 30,000 Interest expense 1,500d Meals and entertainment expense 21,000 Selling expenses 100,000 Repairs and maintenance expense 38,000 Accounting and legal expense 4,500 Charitable contributions 9,000e Insurance expense 24,500f Hourly employees fringe benefits 11,000 Payroll taxes 36,980 Other taxes 2,500 Penalties (fines for overweight trucks) 1,000 (938,004) Operating profit$ 72,996 Other income and losses: Long-term gain on sale of capital assets$ 48,666g Sec. 1231 loss (1,100)h Interest on U.S. Treasury bills 1,200 Interest on State of Florida bonds 600 Dividends from domestic corporations 11,600 Investment expenses (600) 60,366 Net income $ 133,362

a Total MACRS depreciation is $74,311. Assume that $38,000 of depreciation has been allocated to cost of sales for both book and tax purposes so that the book and tax inventory and cost of sales amounts are the same. The AMT depreciation adjustment on personal property is $9,000

b. The cost of goods sold amount reflects the Uniform Capitalization Rules of Sec. 263A. The appropriate restatements have been made in prior years.

c. Officer salaries of $120,000 are included in the total. All are employers W-2 wages

d. Investment interest expense is $500. All other interest expense is trade- or business-related. None of the interest expense relates to the production of tax-exempt income

e. The corporation made all contributions in cash to qualifying charities

f. Includes $3,000 of premiums paid for policies on lives of corporate officers. Bottle-Up is the beneficiary for both policies.

g. The corporation acquired the capital assets on March 3, 2015 for $100,000 and sold them on September 15, 2017, for $148,666.

h. The corporation acquired the Sec. 1231 property on June 5, 2016 for $10,000 and sold it on December 21, 2017, for $8,900.

Bottle-Up, Inc. Balance Sheet for January 1 and December 31 of the Current Year (Problem C:11-61)

January 1 December 31

Assets: Cash $ 15,000 $116,948 Accounts receivable 41,500 45,180 Inventories 102,000 96,000

Stocks 103,000 74,000

Treasury bills 15,000 16,000

State of Florida bonds 10,000 10,000

Building and equipment 374,600 375,000

Minus: Accumulated depreciation (160,484) (173,100)

Land 160,000 190,000

Total $660,616 $750,028

Liabilities and equities:

Accounts payable $ 36,000 $ 10,000

Accrued salaries payable 12,000 6,000

Payroll taxes payable 3,416 7,106

Sales taxes payable 5,200 6,560

Due to Mr. Hiebert 10,000 5,000

Mortgage and notes payable (current maturities) 44,000 52,000

Long-term debt 210,000 260,000

Capital stock 10,000 10,000

Retained earnings 330,000 393,362

Total $660,616 $750,028