Bottle-Up, Inc., was organized on January 8, 2012, and made its S election on January 24, 2012. The necessary consents to the election were filed in a timely manner. Its ad-dress 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. Prepare a 2021 S corporation tax return for Bottle-Up, showing yourself as the paid preparer. Be sure to Include Schedule D, Form 4797, and Form 1125-A, with the Form 1120s. See images for the income statement, balance sheet, and changes to retained earnings.

Chapter 11: S Corporations Chapter 11: S Corporations a Officer salaries of $120,000 are included in the total. All are employer's W-2 wages. b The AMT depreciation adjustment on personal property is $9,000. ' 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. d Of $12,500 total, $4,000 allocated to meals and $8,500 allocated to entertainment. The meals expense was incurred in restaurants and is 100% deductible in 2021. 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. 9 The corporation acquired the capital assets on March 3, 2019 for $100,000 and sold them on September 15, 2021, for $148,666. h The corporation acquired the Sec. 1231 property on June 5,2020 for $10,000 and sold it on December 21,2021 , for $8,900. Chapter 11: S Corporations V TABLE C:11-3 Bottle-Up, Inc. Balance Sheet for January 1 and December 31, 2021 (Problem C:1161) Chapter 11: S Corporations hapter 11 TABLE C:11-4 Bottle-Up, Inc. Statement of Change in Retained Earnings, for the Year Ended December 31, 2021 (Problem C:11-61) a The January 1 accumulated adjustments account balance is $274,300. Chapter 11: S Corporations Chapter 11: S Corporations a Officer salaries of $120,000 are included in the total. All are employer's W-2 wages. b The AMT depreciation adjustment on personal property is $9,000. ' 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. d Of $12,500 total, $4,000 allocated to meals and $8,500 allocated to entertainment. The meals expense was incurred in restaurants and is 100% deductible in 2021. 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. 9 The corporation acquired the capital assets on March 3, 2019 for $100,000 and sold them on September 15, 2021, for $148,666. h The corporation acquired the Sec. 1231 property on June 5,2020 for $10,000 and sold it on December 21,2021 , for $8,900. Chapter 11: S Corporations V TABLE C:11-3 Bottle-Up, Inc. Balance Sheet for January 1 and December 31, 2021 (Problem C:1161) Chapter 11: S Corporations hapter 11 TABLE C:11-4 Bottle-Up, Inc. Statement of Change in Retained Earnings, for the Year Ended December 31, 2021 (Problem C:11-61) a The January 1 accumulated adjustments account balance is $274,300