Chapter 15 TRP 15-2

Harrell and Smith, Inc

Offices located at 204 Ambulance Street, Anywhere, CA 92345

Corporate EIN: 57-1234567

Officers:

Bruce Harrell (SSN 412-34-5670) 1018 Lexington Downs, Anywhere CA 92345

Della Smith (SSN 412-34-5671) 4564 Yates Road Anywhere, CA 92345

Bruce: Compensation $150,000, Dividend $40,000, 40% shareholder

Della: Compensation $225,000, Dividend $60,000 60% owner

Corporation formed 1/1/2009

MACRS depreciation for assests purchased before 2017: 22,000

The compnay does not want to take the 179 deduction

Included in the Non-officer salaries are wages of $20,000 paid to 2 different employees ($10,00 each)

that were both certified by a designated local agency as being a member of one of the targeted groups

and completed 500 hours of service to the employer each

The company has an unused NOL carryover from 2014 of $20,000

Prepare 2017 Form 1120.

Comparative Balance Sheet

As of December 31, 2014, and December 31, 2015

Assets

Cash$ 39,955 $45,459

Investments 258,456 169,125

Office equipment 225,000 310,759

Accumulated depreciation (equipment)(156,000) (165,379)

Building 491,200 491,200

Accumulated depreciation (building)(37,232) (49,826)

Total assets $821,379 $801,338

Liabilities and equity

Notes payable$353,600$335,458

Common stock10,00010,000

Retained earnings457,779455,880

Total liabilities and equity$821,379$801,338

HARRELL AND SMITH, INC.

Income Statement

For the Year Ending December 31, 2015

Revenue

Consulting income$866,689

Interest income4,231

Rental income9,000

Dividend income from less-than-20%-owned domestic corporation(qualified)8,234

Long-term capital losses(8,200)

Total revenue$879,954

Expenses

Salaries and wages (nonowners)$253,000

Officers' salariesHarrell225,000

Smith150,000

Depreciation21,973

Interest expense20,127

Taxes and licenses24,051

Utilities15,500

Travel11,850

Meals and entertainment (100%)12,452

Auto18,500

Insurance (health)7,000

Accounting and legal6,450

Repairs3,200

Charitable contributions12,000

Payroll penalties750

Total expenses$781,853

Net income$ 98,101

Prepare Form 1120, pages 1- 5, for Harrell and Smith, Inc. Schedule D and Form 4562 can be omitted (the information given is not sufficient to complete these forms).