Competency

In this project, you will demonstrate your mastery of the following competency:

• Prepare income tax returns for business entities that adhere to tax laws, regulations, and codes

Scenario

You are a tax associate with a large tax accounting firm. You have been assigned to prepare-a federal income tax return, Form 1120: U.S. Corporation Income Tax Return, and the necessary schedules for SageGreen Computer Corporation, a non-audit client. This project will help you understand the IRS process of completing proper tax returns.

You will complete the corporate tax return, along with the necessary schedules, by the upcoming tax deadline. SageGreen has provided you with its financial statements for the current year. SageGreen's controller has provided all the documentation and support you need to compile the necessary financial data and tax information.

Directions

Complete Part One and Part Two of the project.

Part One: Tax Return

Complete a downloaded Form 1120 from the IRS website (irs.gov). To locate this form, type "Form 1120" in the search bar at the top of the webpage. Be sure to incorporate any Project One Milestone feedback into your work for Project One.

Specifically, you must address the following:

1. Complete Part One of Form 1120 with no errors. Include the following sections of the form in your response:
   1. Income
   2. Deductions
   3. Tax, Refundable Credits, and Payments
2. Prepare Part Two of Form 1120 with no errors. Include the following sections of the form in your response:
   1. Schedule C
   2. Schedule J
   3. Schedule K
3. Prepare Part Three of Form 1120 with no errors. Include the following sections of the form in your response:
   1. Schedule L
   2. Schedules M-1 and M-2

Part Two: Reflection

Write a reflection of your incorporated feedback from the Project One milestone and additional tax research.

Specifically, you must address the following:

1. Explain how your work of preparing Form 1120 for Part One of your project accounted for filing accuracy and completeness. Consider the following in your response:
   1. Examples of how you verified that your work is free from error
   2. Reasons for determining the relevance of certain tax laws, regulations, and codes
2. Explain potential variations in preparation of Form 1120. Consider the following in your response:
   1. Reconciliation of income per books in Schedule M-1
   2. Temporary differences
   3. Book differences versus tax differences

Supporting Materials

Sage Green Computer Corporation Income Statement For the Year Ended December 31 Gross Sales $ 32,000,000.00 Cost of Goods Sold 20,360,000.00 Gross Profit 11,640,000.00 Other Income: Dividends 65,000.00 Interest 20,000.00 Tax-Exempt Interest 6,000.00 Capital Loss (22,000.00) Total Income 11,709,000.00 Expenses: Salaries and Wages 800,000.00 Charitable Contributions 40,000.00 Meals 54,000.00 Total Expenses 894,000.00 Net Income Per Books 10,815,000.00Company Information Address: 1234 Anywhere Blvd, Sun City, AZ 85351 Employer Identification Number (EIN): 85-1234566 1. Meals are subject to 50% limitation. Date Incorporated: 1/2/22 2. Tax exempt interest of $6,000 is earned from Arizona state bonds. 3. Capital stock transactions: a. 4,000 shares of Tech Inc. stock purchased February 1 for $100,000, sold April 1 for $113,000 b. 2,000 shares of WiresNThings stock purchased June 1 for $50,000, sold September 1 for $55,000 c. 3,000 shares of stock purchased April 1 for $140,000, sold September 1 for $100,000 Cost of Goods Sold notes: Beginning inventory $0 Purchases during the year $17,000,000 Cost of labor $3,000,000 Other costs (depreciation) $360,000 Ending inventory $0 Ending Cash Balance will equal Ending Retained Earnings Balance